Calculate your monthly car payment and total cost of ownership.
| Term | Monthly | Total Interest | Total Cost |
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A larger down payment reduces your loan amount and monthly payments.
While payments are higher, you'll pay significantly less interest overall.
Get pre-approved from your bank or credit union before visiting dealers.
A higher credit score can qualify you for significantly lower interest rates.
An auto loan is a type of installment loan used to purchase a vehicle, where the car serves as collateral. You borrow a specific amount, then repay it in fixed monthly payments over a set term (usually 36-72 months). Understanding how auto loans work can save you thousands of dollars and help you avoid common financing pitfalls.
The total cost of a car extends far beyond the sticker price. Interest, taxes, registration, insurance, fuel, and maintenance all add up. A $35,000 car financed at 7% for 72 months costs over $43,000 total—and that's before you factor in insurance, gas, and repairs. That's why understanding the true cost of vehicle ownership is essential.
Key auto loan terms:
This calculator helps you understand your monthly payment, total loan cost, and the true cost of ownership including taxes, insurance, and other expenses.
Our auto loan calculator gives you a complete picture of vehicle financing costs. Here's how to use each input:
The results show your monthly payment, total interest, and complete cost of ownership to help you make an informed decision.
Buying New
Pros: Latest features, full warranty, lower financing rates (often 0% from manufacturers), known history. Cons: Immediate depreciation (15-20% in first year), higher insurance costs, higher price. Best for: Those who keep cars 7+ years, value warranty peace of mind, or can get excellent financing deals.
Buying Used (1-3 Years Old)
The "sweet spot" for value. Someone else absorbed the steep initial depreciation. Often still has remaining factory warranty. Lower purchase price means lower insurance too. Certified Pre-Owned (CPO) programs offer additional warranty protection.
Buying Used (4-7 Years Old)
Significant savings, but higher maintenance risk. Research reliability ratings carefully. May have higher interest rates. Pre-purchase inspection by an independent mechanic is essential. Good for: Budget-conscious buyers who can handle potential repairs.
💡 The 20/4/10 Rule
A guideline for affordable car buying: Put at least 20% down, finance for no more than 4 years, and keep total transportation costs (payment + insurance + fuel + maintenance) under 10% of gross income. This prevents being "car poor."
How much car can I afford?
Follow the 20/4/10 rule: 20% down, 4-year loan max, and total car costs under 10% of gross income. For a $60,000 income, that's $500/month for payment, insurance, and fuel combined. Many experts suggest keeping the purchase price under 35% of your annual income.
Should I get financing from the dealer or my bank?
Always get pre-approved from your bank or credit union first. This gives you a baseline rate and negotiating power. Dealer financing is sometimes better (especially manufacturer 0% offers), but often has higher rates. Compare all options before signing.
Is a longer loan term a good idea?
Generally, no. While 72-84 month loans have lower payments, you pay significantly more interest and risk being underwater (owing more than the car's worth) for years. Stick to 48-60 months maximum. If you need a longer term to afford the payment, the car is too expensive.
What credit score do I need for a good rate?
Excellent credit (750+) typically gets rates of 4-6%. Good credit (700-749) sees 6-8%. Fair credit (650-699) may face 10-15%. Below 650, rates can exceed 18-20%. Before buying, check your credit and improve it if possible—even a small rate difference saves thousands.
Should I pay cash for a car?
If you have the cash and it won't deplete your emergency fund or other priorities, paying cash saves all interest and gives negotiating power. However, if financing offers very low rates (under 4-5%), investing that cash might yield better returns. Do the math for your specific situation.
What about leasing vs. buying?
Leasing offers lower monthly payments but you never own the car and face mileage limits and fees. Buying costs more monthly but builds equity. Leasing makes sense only if you always want a new car every 2-3 years and drive under 12,000 miles annually. For most people, buying is financially better.
What's gap insurance and do I need it?
Gap insurance covers the difference between what you owe and what your car is worth if it's totaled. It's essential if you put less than 20% down or have a loan longer than 48 months. You can get it through your auto insurer (usually cheaper) or the dealer.
Know the invoice price, market value, and fair deal range before negotiating. Use Edmunds, TrueCar, and Kelley Blue Book. Information is your best negotiating tool.
Secure financing before visiting dealers. This separates the price negotiation from the financing discussion and gives you leverage. You can still use dealer financing if it's better.
Don't focus on monthly payment—dealers can manipulate terms to hit any payment while maximizing their profit. Negotiate the out-the-door price, then arrange financing separately.
Best times to buy: end of month/quarter/year (dealers have quotas), when new models arrive (previous year gets discounts), and weekdays (less competition, more attention).