How your car payment is calculated
An auto loan uses the same amortization formula as a mortgage. We subtract your down payment and any trade-in value from the price to get the amount financed, then spread it over your chosen term at the given interest rate.
The longer the term, the lower the monthly payment — but the more total interest you pay, and the longer you risk owing more than the car is worth ("being underwater").
Tips to pay less
- Keep the term short. A 48-month loan costs far less interest than an 84-month one.
- Put more down. A bigger down payment shrinks the loan and the interest.
- Shop the rate. Get pre-approved by a bank or credit union before visiting the dealer — even 1% lower APR adds up.
- Watch the total, not just the monthly. Dealers can lower your payment by stretching the term while you pay more overall.
Before you finance
Auto loan rates
Pre-qualify with multiple lenders to find the lowest APR without hurting your credit.
Compare lenders →Refinance your car
If your credit improved or rates dropped, refinancing can lower your payment.
Check rates →Frequently asked questions
Does this include sales tax and fees?
No — it estimates principal and interest only. Taxes, registration, and dealer fees vary by location and are often rolled into the loan, increasing the amount financed.
What's a good auto loan term?
Many experts suggest keeping it to 48–60 months. Longer terms lower the monthly payment but cost more interest and increase the risk of owing more than the car is worth.
Related tools
Comparing financing with paying cash? See how that money could grow instead with the compound interest calculator.