Calculator Wizard
How Auto Loan Payments Are Calculated
An auto loan uses the same amortization math as a mortgage — a fixed payment calculated so the loan is fully paid off, principal and interest, by the end of the term. The main practical difference is the much shorter term, which changes the balance between principal and interest in each payment.
Where M is the monthly payment, P is the loan amount, r is the monthly interest rate (APR ÷ 12), and n is the number of monthly payments.
Worked Example
Example: $28,000 loan, 6.9% APR, 5-year term
Step 1: Monthly rate → 6.9% ÷ 12 = 0.575%
Step 2: Number of payments → 5 × 12 = 60
Step 3: Apply the formula → $553.11 per month
Over the full term, total interest paid comes to $5,186.81 on top of the $28,000 principal.
Term Length vs. Total Cost
A shorter loan term means a higher monthly payment but significantly less total interest, since you're borrowing the same money for less time. A longer term lowers the monthly payment but increases the total interest paid — the same tradeoff that applies to any amortized loan, mortgages included.
Does this include taxes, fees, or a down payment?
No — this calculates payment on the loan amount you enter. If you're financing the full vehicle price, remember to subtract any down payment and trade-in value first, and account separately for sales tax and fees, which vary by location and dealer.
Why do auto loan rates differ so much between lenders?
Rates depend on factors like credit history, loan term, new vs. used vehicle, and the lender itself. Comparing offers from multiple lenders before financing is one of the most effective ways to reduce total interest paid.
Financing something else, like a home?
Try the Mortgage Payment Calculator