How to Calculate a Car Loan
Our online car loan calculator will help you work out just how much your monthly car loan repayments will actually be. This calculator will also display an illustration of how much you should expect to repay on a monthly basis. When taking out a car loan, you should:
- Use our interest calculator to provide you with an illustration of your monthly car loan repayment amounts for different terms and interest rates.
- Before you commit to a car loan agreement, review the car loan borrowing considerations.
Our car loan calculator will calculate your monthly interest repayment over several years then compare them to a separate monthly repayment period, which you can choose.
Car Loan Formula
The Car Loan Calculator uses the following basic formula:
Monthly Car Loan Payment = { Rate + Rate / [(1 + Rate) months -1] } x Principal Car Loan Amount
Where:
Rate (Monthly Interest Rate) = Decimal Rate / 12 , or Rate = (Annual Interest Rate / 100) / 12
Things to Consider When Taking Out a Car Loan
- Affordable: Make sure that you are able to afford the repayments that are to come on your car loan. You are the only one who really knows whether or not you can invest in a new car, and whether or not taking out loans will only cause more financial struggles in the future.
- Look At Different Companies: Before you even consider the loan, take a look at a variety of different companies. Check out both banks and lender companies. Find out how flexible they are as a business, and the rates that they offer. Be careful when looking at car dealerships when taking out a loan, banks are usually quite a bit cheaper than car dealerships.
- Research: It's important to research on better deals. It's not uncommon for to banks run promotions at certain times of the year, so never presume that one bank is better than the other. Banks are a lot cheaper when it comes to interest than car dealerships.
- Interest Rates: Make sure you fully read into the interest rates applied to the car loan. You may think that you are getting an incredibly deal with a low-interest rate, but on the other hand you may have to pay that loan off for another couple of years meaning you are paying a noticeably larger amount.
- Borrow Little, Repay Quickly: It's important that you don't get out of your depths with your loan. Borrow the minimum amount you need to take out the loan, and repay it as soon as you can.
- Pay Day Loans: Never use a Pay Day lender, this is a fantastic way to completely destroy your financial credibility. These lenders have no consideration of your well-being and will help destroy your financial situation as long as it benefits them. Avoid them at all costs.
- Don't Lend at All: Although it may be difficult in the current day and age, try to avoid taking out a loan all together. It may be tempting to get that little extra money to buy your car, but it will feel a lot better if you earn the money yourself.
- Choose Between a Personal Loan or a Car Loan: Again, do your research. Although personal loans usually offer far better interest rates than car loans. Car dealerships are known to push you towards taking out loans which have a ridiculous APR rate. When you are looking to invest in buying a new car, be patient and look at different lenders.
- Personal Contract Purchase (PCP): PCP's are becoming increasingly popular over recent years. This is because they allow there to be no deposit required for a loan. Although PCP's are often a good choice, be aware of the risks you are taking with them. These risks consist of:
- Understand that you do not own the company. The car is the legal responsibility of the financial company and definitely not you. Until you have paid the final payment, you do not own the car.
- There are normally mileage restrictions included in PCP contracts. This restriction is usually annually and if you exceed the limitation you will be subject to being charged additional fees if you choose not to pay the final payment.
- Once you have signed the contract and choose that it is no longer the car you want, or your overall circ*mstances change, you are able to cancel the contract although there are fees including in doing that.
- As much as you want to, you cannot make any modifications to the vehicle. New wheels? Tinted windows? Don't as much as think about it. Remember, it isn't your car, you can't make these sorts of changes to it.
You may also be interested in our free Car Depreciation Calculator
FAQs
Calculators Only Provide Estimates
Because they are dependent on the accuracy of the information you enter, they may be different than what a dealership will really offer you. The best use for these calculators is in helping you compare cars.
How much is a $40,000 car loan payment 84 months? ›
For example, a car buyer considering a $40,000 new car loan with an 84-month term at 9% APR would have a monthly car payment of about $623 and pay $12,369 in interest over the seven-year loan.
How much is a $30,000 car payment for 5 years? ›
Provided the down payment is $5,000, the interest rate is 10%, and the loan length is five years, the monthly payment will be $531.18/month.
How much is a $25,000 car payment? ›
Example: A six year fixed-rate loan for a $25,000 new car, with 20% down, requires a $20,000 loan. Based on a simple interest rate of 3.4% and a loan fee of $200, this loan would have 72 monthly payments of $310.54 each and an annual percentage rate (APR) of 3.74%.
What is the rule of thumb for calculating car payment? ›
Aim to spend less than 10% of your take-home pay on your car payment and less than 20% on overall car expenses.
What is a realistic monthly car payment? ›
How much of my salary should I spend on a car payment? According to our research, you shouldn't spend more than 10% to 15% of your net monthly income on car payments. Your total vehicle costs, including loan payments and insurance, should total no more than 20%.
What is a good APR for a car? ›
Generally, a good APR for a car loan might look something like this: Excellent Credit (750+): 3% or lower for new cars, 4% or lower for used cars. Good Credit (700-749): 4-5% for new cars, 5-6% for used cars. Fair Credit (650-699): 6-7% for new cars, 7-8% for used cars.
What is the payment on a 72 month 1.99% car loan for $60,000? ›
The monthly payment on a $60,000 car loan with a 1.99% interest rate over 72 months is $854.77.
What car can I afford with a 40k salary? ›
on the price of a car. is not to exceed 35% of your gross income. That means if you make $40,000 a year, the cars price should not exceed $14,000. If you make $80,000, the cars price should be below $28,000. And at 150 k salary, that means your max car price should be 50 2500.
Who has the lowest auto loan rates? ›
Compare Car Loan Rates
| Top Auto Loan Lender | Lowest APR | Term Length |
|---|
| Consumers Credit Union | 5.99% | Up to 84 months |
| Auto Credit Express | Varies | Varies |
| iLending | 5.49% | Varies |
| Gravity Lending | 4.99%** | 36 to 84 months |
3 more rowsAug 6, 2024
7 ways to pay off your car loan faster
- Refinance with a new lender. ...
- Make biweekly payments. ...
- Round your payments to the nearest hundred. ...
- Opt out of unnecessary add-ons. ...
- Make a large additional payment. ...
- Pay each month. ...
- Take advantage of lender discounts.
How much should I spend on a car if I make $60,000? If your gross salary is $60,000, your take-home monthly pay is probably around $3,750, assuming about 25% of your pay goes toward taxes and other expenses. Based on the 10-15% calculation, you should spend no more than $562.50 on a monthly car payment.
What credit score do you need for a $25000 car loan? ›
While there is no set credit score to get an auto loan, a majority of approved borrowers have scores above 660.
Are CarMax interest rates high? ›
CarMax is the largest dealer of used cars in the country, offering a wide range of financing options. Here's what you need to know before filling out your loan application: Competitive rates: With APRs as low as 5.99% for the most qualified borrowers, CarMax may give other online lenders a run for their money.
What is a good credit score to buy a car with no down payment? ›
Boost Your Credit Score
Your credit score is crucial to determine your eligibility for a no down payment car loan. Most lenders require a FICO credit score of at least 680 before you can qualify. If your credit score falls below 680, improve your credit score before you apply to help you qualify in the future.
How accurate are loan calculators? ›
Mortgage calculators provide general estimates based on the information you input, such as loan amount, interest rate, and loan term. While they offer a close approximation, keep in mind that actual payments may vary based on factors like taxes, insurance and interest rates.
What score do most auto lenders use? ›
Most lenders use FICO, which ranges from 300 to 850. VantageScore is less common but still ranges from 300 to 850. Both scores use a mix of your credit history, amount owed, balances and available credit — just weighted differently. Some auto lenders also use a version of the FICO score called FICO Auto Score.
Why do most car experts tell you to put 20% down and pay for 36 months? ›
It's typical to put down 20% of the purchase price when financing a car purchase. The lender might not require that amount, but it will help you avoid owing more on the loan than the vehicle is worth and closer to full ownership.
