How this works

Car loans use the same amortization math as a mortgage — a fixed interest rate applied to a declining principal balance produces a fixed monthly payment that reaches zero at term end. The key differences are the timescale (36 to 84 months instead of 15 or 30 years) and the rate environment. Auto loan rates tend to run higher than mortgage rates because cars depreciate: if you stop paying, the lender repossesses an asset that is worth less than when it was purchased, which means greater lender risk than a home loan.

The amount financed is the vehicle price minus your down payment and any trade-in value applied. If you're rolling in sales tax, registration fees, or dealer fees — as is common with dealer financing — those amounts increase the amount financed and should be included in the vehicle price field to get an accurate payment estimate.

Loan term: what the trade-off really looks like

The shift from 48-month to 72-month car loans has become common because it makes expensive vehicles fit a monthly budget. But the total cost difference is significant. On a $25,000 loan at 7%:

48 months

Monthly payment ~$598 · Total interest ~$3,700

60 months

Monthly payment ~$495 · Total interest ~$4,700

72 months

Monthly payment ~$425 · Total interest ~$5,600

Stretching from 48 to 72 months saves $173/month but costs roughly $1,900 more in total interest. There's also a depreciation risk: cars lose value faster than a 72-month loan amortizes, so you can end up "underwater" (owing more than the car is worth) for the first several years.

New vs. used loan rates

Lenders typically offer lower rates on new vehicles than used ones, because new vehicles have a known value and manufacturer backing. Used car loan rates can be 1–4 percentage points higher, depending on the vehicle's age, mileage, and your credit profile. If you're comparing new vs. used vehicles, factor in the likely rate difference — a used car priced $5,000 less might end up costing more in total if it carries a significantly higher interest rate over a long term.

Frequently asked

Does a longer term always mean paying more?

Yes, for the same rate — stretching from 48 to 72 months lowers the monthly payment but increases total interest paid. The calculator shows the exact difference: try the same vehicle price with different term lengths and compare the "Total paid over term" figures.

Should I include tax and fees in the vehicle price?

If they're being financed as part of the loan (common with dealer financing), include them in the vehicle price field so the payment estimate reflects the full amount borrowed. If you're paying taxes and fees at signing out of pocket, leave them out.

What's a reasonable interest rate for a car loan?

Rates vary widely by credit score, lender, vehicle type, and loan term. Credit unions often offer more competitive rates than dealer financing. Getting pre-approved by your bank or credit union before visiting a dealership gives you a known rate to compare against whatever the dealer offers.

Is it worth making a larger down payment?

A larger down payment reduces the amount financed, which lowers both the monthly payment and total interest. It also reduces the period during which you're "upside down" on the loan. If you can afford it without depleting your emergency fund, a larger down payment is generally the better financial choice.