How Car Loan Amortization Works
Buying a new or used car is a significant financial decision. Understanding how your monthly payments are calculated can help you save thousands of dollars in interest. This Car Loan Calculator helps you estimate your monthly auto loan payments, including the impact of interest rates (APR), loan terms, and down payments.
Key Terms Explained
- Principal: The actual amount you borrowed to buy the car (Price minus Down Payment & Trade-in).
- APR (Interest Rate): The annual cost of borrowing money. A lower APR means lower monthly payments.
- Loan Term: The duration of the loan. Longer terms (e.g., 72 or 84 months) lower the monthly payment but increase the total interest paid.
- Trade-In Value: The amount the dealer offers for your old vehicle, which is deducted from the new car price.
Frequently Asked Questions (FAQ)
How much car can I afford?
Financial experts recommend that your car payment should not exceed 10-15% of your take-home pay. Don't forget to factor in insurance and fuel costs.
Should I choose a longer loan term?
While a 72 or 84-month loan lowers your monthly bill, you will pay significantly more in interest over the life of the loan. A 60-month term is often the "sweet spot."
Does this calculator include taxes?
Yes, our advanced tool allows you to input your local Sales Tax rate and Title/Registration fees to give you a true "Out-the-Door" price estimate.