About this calculator
Car loans are the most expensive consumer debt most people carry, mainly because the terms are long and the rates are high. A 72-month loan at 8% on a $30,000 car costs more in interest than the car was worth for many years of its life.
How it works
The payment is a standard amortized figure. The break-even rate shows the point at which stretching the term stops costing less in total, which is the number to watch when a dealer offers a longer term to make the payment look smaller.
Frequently asked questions
How is a car loan payment calculated?
The same amortization formula as any loan: monthly payment = principal × monthly rate × (1 + rate)^months / ((1 + rate)^months − 1).
How long should a car loan be?
Shorter is better whenever you can afford it. Sixty months is a reasonable compromise. Stretching to 72 or 84 months lowers the payment but adds substantially more interest, and the car may be worth less than you owe.
Does a bigger down payment help?
Yes, twice over. It reduces the amount financed so you borrow less, and because lenders price risk into the rate, a larger down payment usually also earns you a lower rate.
Should I finance or pay cash for a car?
Paying cash avoids interest entirely, but many people sensibly keep an emergency fund invested and borrow at a low rate instead. The trade-off is whether your returns beat the loan rate, weighed against the certainty of not touching your savings.
Can I refinance an auto loan?
Yes, and it can help if your credit has improved substantially or the original rate was high. Be aware of state fees and title transfer costs, which can eat into a modest rate reduction.
Does paying off the car early save money?
Yes. Car loans rarely carry prepayment penalties, so every extra dollar goes to principal and reduces the interest that would have accrued after that point.