Car Loan Calculator
Enter the amount you are financing, the rate and the term, and this gives you the monthly payment and what the finance adds to the price of the car. Longer terms lower the payment and raise the total, which is the trade-off worth seeing before you sign.
Monthly payment
$495.03per month
- Monthly payment
- $495.03
- Total interest
- $4,701.80
- Total repaid
- $29,701.80
- Term
- 5 years
- First month interest
- $145.83
- First month principal
- $349.20
- Principal and interest only. Fees, insurance and any taxes a lender bundles into the quoted figure are separate from the loan itself.
- Assumes a fixed rate for the whole term and every payment made on time.
About the car loan calculator
Car finance is the same arithmetic as a mortgage over a much shorter term, and the shortness is what makes it feel cheap. A $25,000 loan at 7% over five years is about $495 a month and costs roughly $4,700 in interest — a fifth again on top of the car.
The number worth watching is the term. Dealers often present a longer term as a way to afford a better car, because it lowers the monthly figure. Stretching that same $25,000 from five years to seven drops the payment to about $377 but pushes the interest past $6,600. You pay less each month for longer, and more in total.
Long terms carry a second problem the arithmetic does not show. Cars lose value faster than a long loan pays down, so for much of a seven-year term you can owe more than the car is worth. That only matters if you need to sell or the car is written off, but those are exactly the moments it matters most.
What it works out
- The monthly payment on car finance
- Total interest — what the loan adds to the price
- Any rate and term, fixed-rate
- New or used, dealer finance or a bank loan
The formula
M = P × r(1 + r)ⁿ ÷ ((1 + r)ⁿ − 1)
The same amortization formula every fixed-rate loan uses. P is the amount financed, r is the monthly rate, and n is the number of monthly payments.
The one thing to get right before you start is what P actually is. Finance is on the price less your deposit and any trade-in, but plus anything rolled into the deal — negative equity from the last car, extended warranties, paint protection, gap insurance. Those extras are financed at the same rate as the car and are the most common reason a payment comes back higher than expected.
Beware of comparing deals on the monthly payment alone. Two offers with the same payment can differ by thousands once you multiply the payment by the term and subtract the amount borrowed. That total is the real price of the money, and it is the figure this shows alongside.
- P
- The amount financed: the price less deposit and trade-in, plus anything rolled into the loan.
- r
- The monthly rate — the annual rate divided by 12.
- n
- The number of monthly payments. Five years is 60.
A worked example
Twenty-five thousand financed at 7% over five years.
That works out to $495.03 per month.
- Monthly payment
- $495.03
- Total interest
- $4,701.80
- Total repaid
- $29,701.80
- Term
- 5 years
- First month interest
- $145.83
- First month principal
- $349.20
Questions
What is the payment on a $25,000 car loan?
About $495 a month at 7% over five years, with roughly $4,700 of interest across the term. Over six years the payment drops to about $426 and the interest rises to around $5,700.
Is a longer car loan a bad idea?
It costs more and carries more risk. The payment falls, the total interest rises, and because cars depreciate faster than a long loan pays down, you can spend years owing more than the car is worth. That is only a problem if you need to sell or it is written off — but that is when you can least afford it.
Should I compare deals on the monthly payment?
No. Compare the total repaid. Two offers with identical monthly payments can differ by thousands once you account for the term, and a lower payment over a longer term almost always costs more.
Does 0% finance actually mean free?
Only if the cash price is the same. Zero per cent deals are often offered instead of a discount, so compare the total you would pay on the finance deal against the discounted cash price plus what a bank loan would cost. Sometimes the discount wins.
What about a trade-in with negative equity?
If you owe more on your current car than it is worth, that difference usually gets added to the new loan. Include it in the amount financed here, because it is borrowed money charged at the same rate.
How much deposit should I put down?
Enough that you are not underwater immediately, which usually means at least ten to twenty per cent on a new car, since a new car loses a large part of its value in the first year. A larger deposit also lowers both the payment and the total interest.