Auto Loan Calculator
Calculate your car loan monthly payment including vehicle price, down payment, trade-in value, sales tax, and interest.
Auto Loan
Complete Auto Loan Calculator
Calculate your auto loan payment including all fees, taxes, and trade-in. See total cost of ownership with insurance and maintenance.
Vehicle Condition
Trade-In (Optional)
Tax Amount: $2,625
Out-the-Door Price
Out-the-Door Price Breakdown
Total Cost of Ownership (5.0 years)
Depreciation Impact
New vehicles depreciate significantly. After 5.0 years:
Auto Loan Tips
- •20/4/10 Rule: 20% down, 4-year max loan, 10% of gross income max
- •Get pre-approved: Know your rate before visiting dealerships
- •Avoid long terms: 72+ month loans cost much more in interest
- •Factor total cost: Don't just focus on monthly payment
Auto Loan Guide: Everything You Need to Know
An auto loan (also called a car loan or vehicle loan) is a secured loan used to purchase a new or used vehicle. The car serves as collateral—if you fail to make payments, the lender can repossess it. Most auto loans have terms of 36-72 months, with interest rates ranging from 3% to 15%+ depending on your credit score, the vehicle's age, and whether you're buying new or used.
Key Statistics: The average new car loan in 2025 is $41,665 with a6.73% APR and 68-month term. The average monthly payment is $736. For used cars, it's $27,940 at 9.30% APR for 66 monthswith a $559 monthly payment.
How Auto Loans Work:
- Secured Loan: The vehicle is collateral—lenders can repossess if you default
- Fixed Monthly Payments: Same payment amount for the entire loan term
- Simple Interest: Interest charged only on remaining principal balance
- Down Payment: 10-20% down reduces loan amount and may get better rates
- Trade-In Credit: Your old vehicle's value can serve as down payment
⚠️ The 20/4/10 Rule for Auto Loans
20% down, 4-year loan maximum, 10% of gross income for total transportation costs (loan payment + insurance + gas + maintenance). Following this rule helps prevent becoming "car poor" and underwater on your loan.
New Car Loans vs. Used Car Loans
Lenders offer different terms and rates for new vs. used vehicles because new cars have lower default risk and depreciate more predictably. Here's how they compare:
New Car Loans
- ✓Lower Interest Rates: 3-7% APR (excellent credit)
- ✓Manufacturer Incentives: 0% APR promos, cashback rebates
- ✓Full Warranty: 3-5 years, fewer repair costs
- ✓Longer Terms Available: 72-84 months (not always wise)
- ✗Faster Depreciation: Lose 20-30% value in first year
- ✗Higher Purchase Price: Avg. $41,000+ for new cars
Best For: Buyers wanting latest features, full warranty, and low maintenance costs who can afford higher payments
Used Car Loans
- ✓Lower Purchase Price: Avg. $27,000 for used cars
- ✓Slower Depreciation: Already took biggest value hit
- ✓Lower Insurance Costs: 10-15% cheaper premiums
- ✓More Negotiation Room: Private sellers, dealer markdowns
- ✗Higher Interest Rates: 6-15% APR (varies by age/mileage)
- ✗Higher Repair Risk: Limited or no warranty
Best For: Budget-conscious buyers seeking reliable transportation without the new car premium
Real-World Comparison: $35,000 New Car vs. $20,000 Used Car (3 Years Old)
New Car ($35,000 @ 5.5% APR, 60 months):
- • Down Payment (15%): $5,250
- • Loan Amount: $29,750
- • Monthly Payment: $567
- • Total Interest: $4,270
- • Total Cost (5 years): $39,270
- • Estimated Value After 5 Years: $17,500 (50% depreciation)
- • Net Cost: $21,770
Used Car ($20,000 @ 8.5% APR, 48 months):
- • Down Payment (20%): $4,000
- • Loan Amount: $16,000
- • Monthly Payment: $395
- • Total Interest: $2,960
- • Total Cost (4 years): $22,960
- • Estimated Value After 4 Years: $12,000 (40% depreciation)
- • Net Cost: $10,960
💰 Result: The 3-year-old used car saves you $10,810 in net cost over similar timeframes, despite the higher interest rate! That's the power of avoiding new car depreciation.
How Your Credit Score Affects Auto Loan Rates
Your credit score is the #1 factor determining your auto loan interest rate. A difference of 100 credit points can cost or save you $4,000-$8,000 over the life of a car loan.
| Credit Score Range | Credit Tier | Avg. APR (New Car) | Avg. APR (Used Car) | Monthly Payment ($30k, 60mo) |
|---|---|---|---|---|
| 781-850 | Super Prime | 5.61% | 7.19% | $575 |
| 661-780 | Prime | 6.88% | 9.25% | $594 |
| 601-660 | Nonprime | 9.75% | 13.90% | $635 |
| 501-600 | Subprime | 13.42% | 18.49% | $695 |
| 300-500 | Deep Subprime | 14.78% | 21.32% | $712 |
💡 Cost of Poor Credit
A buyer with a 500 credit score pays $137/month MORE than someone with a 780 score on the same $30,000 car loan. Over 60 months, that's $8,220 in extra interest. If your score is below 680, consider improving it for 6-12 months before buying to save thousands.
How to Improve Your Auto Loan Approval:
✓ Boost Your Credit Score
Pay down credit card balances below 30% utilization, dispute errors on credit report, avoid new credit inquiries
✓ Make a Larger Down Payment
20%+ down reduces lender risk and can lower your interest rate by 0.5-1%
✓ Get Pre-Approved Before Shopping
Know your rate and budget; prevents dealer from marking up financing
✓ Consider a Co-Signer
Someone with strong credit can help you qualify for lower rates
Choosing the Right Loan Term (36, 48, 60, or 72 Months?)
Auto loan terms range from 24-84 months, but 48-60 months is the sweet spot for most buyers. Longer terms = lower monthly payments but significantly more interest paid. Here's how different terms compare:
$30,000 Loan at 7% APR—Different Terms Compared:
36 Months
- • Payment: $927/mo
- • Total Interest: $3,372
- • Lowest Interest ✓
48 Months
- • Payment: $718/mo
- • Total Interest: $4,464
- • Best Balance ✓
60 Months
- • Payment: $594/mo
- • Total Interest: $5,642
- • Most Popular ✓
72 Months
- • Payment: $508/mo
- • Total Interest: $6,576
- • Underwater Risk ✗
Pros & Cons by Term Length:
⚠️ Avoid 72-84 Month Loans Unless Necessary
Extended loans keep you "underwater" (owing more than car's value) for 3-5 years. If you total the car or need to sell early, you'll owe more than it's worth unless you have gap insurance.
Only consider 72+ months if:
- ✓ Interest rate is very low (under 4%)
- ✓ You plan to keep car for 10+ years
- ✓ You have gap insurance
- ✓ Monthly budget is extremely tight
Why it's risky:
- ✗ Car depreciates faster than loan paydown
- ✗ Still making payments when car needs repairs
- ✗ $3,000+ extra in interest vs. 48-month loan
- ✗ Harder to trade-in or sell early
💡 The "Right" Loan Term Rule
New Cars: 48-60 months maximum. Used Cars: 36-48 months maximum, shorter for older vehicles (don't finance a 10-year-old car for 72 months!). If you can't afford payments on a 48-60 month loan, buy a less expensive car.
Hidden Costs & Dealer Add-Ons to Avoid
The sticker price and interest rate aren't the only costs. Dealers and lenders often add fees and products that can inflate your total cost by $3,000-$10,000. Here's what to watch for:
Costs You Can Usually Avoid or Negotiate:
❌ Extended Warranties (Service Contracts)
Cost: $1,500-$4,000. Often don't cover what you think and have high deductibles. New cars already have manufacturer warranty. If buying used, shop for third-party warranties for half the dealer price.
❌ Gap Insurance (Dealer-Sold)
Cost: $500-$800 from dealer. Protects if car totaled and you owe more than it's worth. Buy from your auto insurance company instead for $20-$50/year (save $600+).
❌ Paint Protection / Fabric Protection
Cost: $500-$1,500. Overpriced wax/sealant you can apply yourself for $50. Dealers charge 10-30x retail cost.
❌ Dealer Documentation Fees (Above $200)
Cost: $50-$800 depending on state. Covers paperwork processing. Negotiate down or walk away if above $200-$300.
❌ VIN Etching / Theft Protection
Cost: $200-$500. Engraves VIN on windows supposedly to deter theft. Costs dealer $10. Decline or DIY kits are $15.
❌ Nitrogen Tire Inflation
Cost: $100-$300. Minimal benefit over regular air. Free at many tire shops if you really want it.
⚠️ Costs You Can't Avoid (But Can Plan For):
- • Sales Tax: 3-10% depending on state (usually 6-8%)
- • Registration & Title Fees: $50-$500 depending on state
- • Auto Insurance: $100-$300/month (required before driving off lot)
- • License Plate Fee: $25-$150
- • Smog/Inspection Fee: $20-$100 in some states
✓ Pro Tip: The "Out-The-Door Price" Strategy
Always negotiate the total out-the-door price (vehicle price + all fees + taxes) BEFORE discussing financing. Dealers obscure true cost by focusing on monthly payments. Get the final number in writing, then shop for financing separately with banks/credit unions to ensure you're getting the best rate.
7 Strategies to Save Thousands on Your Auto Loan
1. Get Pre-Approved Before Shopping
Apply with your bank, credit union, or online lender BEFORE visiting dealers. Pre-approval gives you a baseline rate to compare against dealer financing and strengthens negotiating power. Credit unions often offer 0.5-1.5% lower rates than dealer financing.
2. Put Down 20% to Avoid Being Underwater
A 20% down payment ensures you won't owe more than the car's value after driving off the lot. Cars depreciate 20-30% in the first year. Without a substantial down payment, you could be underwater for years, making it impossible to trade-in or sell without paying the difference.
3. Buy a 2-3 Year Old Certified Pre-Owned (CPO) Car
CPO vehicles are inspected, refurbished, and come with extended warranties—but cost 30-40% less than new. You avoid the steepest depreciation while still getting warranty protection and financing rates close to new car rates. The best value in automotive.
4. Negotiate Price and Financing Separately
Dealers use "four-square" tactics (vehicle price, trade-in value, down payment, monthly payment) to confuse buyers. Negotiate the vehicle price FIRST, agree on that number, THEN discuss financing. This prevents them from hiding profit in one area by giving a deal in another.
5. Make Extra Payments Toward Principal
Most auto loans have no prepayment penalty. Even an extra $50-$100/month directly reduces principal and can shave 12-18 months off a 60-month loan, saving $1,500-$3,000 in interest. Use tax refunds and bonuses for lump-sum payments.
6. Refinance When Interest Rates Drop or Your Credit Improves
If interest rates fall or your credit score increases by 50+ points, refinance your auto loan. Dropping from 8% to 5.5% on a $25,000 balance with 3 years remaining saves ~$1,000. Check every 12-18 months for refi opportunities.
7. Follow the 20/4/10 Rule Religiously
20% down, 4-year loan maximum, total transportation costs under 10% of gross income. If you can't meet this rule, you're buying too much car. This prevents becoming "car poor" and ensures you maintain financial flexibility for emergencies and other goals.
Auto Loan FAQ
Q: Should I finance through the dealer or my bank?
Shop both and compare. Dealers have access to multiple lenders and sometimes offer promotional rates (0% APR on new cars). However, they may mark up rates to earn commission. Get pre-approved at your bank/credit union first (they often have lower rates), then let the dealer try to beat it. Credit unions typically offer 0.5-1.5% lower rates than dealer financing and banks.
Q: How much car can I afford?
Use the 20/4/10 rule: Total monthly transportation costs (loan payment + insurance + gas + maintenance) should be under 10% of gross monthly income. For a $5,000/month income, that's $500 max. If loan payment is $350, you have $150 for insurance, gas, and repairs. Most experts recommend keeping the vehicle purchase price under 35-50% of your annual gross income.
Q: Does a larger down payment lower my interest rate?
Sometimes, but not always. A 20%+ down payment can lower your rate by 0.25-0.75% because it reduces lender risk. However, your credit score has a bigger impact—a 100-point score difference affects rates more than down payment size. That said, larger down payments reduce total interest paid simply by reducing the loan amount, and they prevent you from being underwater.
Q: Can I negotiate my auto loan interest rate?
Absolutely! Dealers mark up interest rates by 1-3% above what lenders approve to earn commission. If approved at 6% but quoted 8%, negotiate down or walk away. This is why pre-approval is critical—you know your true rate and can call out excessive markups. Also shop multiple dealers; their lender networks vary.
Q: What happens if I can't make my car payment?
Act immediately—don't ignore it. Contact your lender BEFORE missing a payment. Options: (1) Deferment (skip 1-2 payments, but interest accrues), (2) Loan modification (extend term to lower payments), (3) Refinance to lower rate/payment, or (4) Voluntary repossession (hurts credit but avoids repo fees). Repossession destroys your credit for 7 years, triggers deficiency balance lawsuits, and you still owe the difference after auction.
Q: Should I lease or buy?
Buy if: You drive 15,000+ miles/year, keep cars 7+ years, want to build equity, or modify vehicles.Lease if: You want a new car every 2-3 years, drive under 12,000 miles/year, prioritize warranty coverage, and can afford perpetual payments. Leasing is financially equivalent to renting—you build zero equity. Over 10 years, buying costs 30-50% less than continuous leasing.
Q: When should I pay off my car loan early?
Pay off early if: Your interest rate is above 6%, you have no high-interest debt (credit cards), you've maxed out retirement contributions (at least employer match), and you have a 3-6 month emergency fund.Don't pay off early if: Your rate is below 4%, you have high-interest debt elsewhere, or you could invest the money for higher returns (8-10% stock market average vs. 3-5% loan rate).
Your Smart Auto Loan Action Plan
An auto loan is likely the second-largest debt you'll ever take on (after a mortgage). Making smart decisions can save you $5,000-$15,000 over the life of the loan. The key is preparation, negotiation, and discipline.
Before You Buy Checklist:
- Use our calculator above to determine affordable payment based on 20/4/10 rule
- Check your credit score—improve it if below 680 to save thousands
- Get pre-approved with bank/credit union for baseline rate
- Save 20% down payment to avoid negative equity
- Research true market value using KBB, Edmunds, or Carvana
- Negotiate out-the-door price first, then discuss financing separately
- Decline unnecessary dealer add-ons (extended warranty, paint protection, etc.)
"I almost financed $40,000 for a new truck at 7.5% for 72 months ($640/month). Instead, I bought a 3-year-old certified truck for $28,000 at 5.2% for 48 months ($645/month)—similar payment but I'll save $11,000 total and own it 2 years sooner!"— Tyler D., 32, software engineer
Remember: Cars are depreciating assets. The goal isn't the fanciest vehicle—it's reliable transportation at the lowest total cost. Buy smart, negotiate hard, and prioritize financial flexibility over status. Your future self will thank you! 🚗💰
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