How is a car loan payment calculated?

The standard amortisation formula is M = P[r(1+r)^n] / [(1+r)^n − 1], where P is the amount financed (vehicle price + sales tax − down payment − trade-in), r is the monthly interest rate (APR ÷ 12), and n is the number of monthly payments. The same fixed payment is made every month; early payments are mostly interest, later payments mostly principal.

What APR can I expect on a car loan in 2026?

In May 2026, average APRs in the US run about 7.0% for new cars with prime credit and 11–13% for used. UK and EU APRs average 6–9% via PCP/HP. Subprime borrowers can pay 15%+. Always shop at least three lenders — your credit score moves the rate by 3–6 percentage points.

Should I make a larger down payment?

Yes, almost always. A 20% down payment on a new car (10% on used) keeps you out of negative equity, lowers your monthly payment, and often unlocks a lower APR. It also reduces total interest paid because you finance less principal.

Is a 72-month or 84-month car loan a bad idea?

Long terms lower the monthly payment but you stay underwater longer (the car depreciates faster than you pay it off) and total interest balloons. A $30,000 loan at 8% costs about $5,200 in interest over 60 months versus $9,000 over 84 months. Stick to 60 months or less when possible.

Does this calculator include sales tax and fees?

Yes. Enter your local sales tax rate and the calculator adds it to the financed amount (most US states tax the vehicle price minus trade-in; some tax the full price). Documentation, registration and dealer fees are not modelled — add them manually to the vehicle price if you want the full out-the-door figure.

🚗 Auto Loan Calculator

Estimate your monthly car payment, total interest, sales tax and full amortisation schedule. Works for new or used cars in USD, GBP or EUR.

Vehicle Price

Currency

Down Payment

Trade-In Value

Sales Tax (%)

Annual Interest Rate / APR (%)

Loan Term

⚠️ Illustrative only. Actual APR depends on credit score, lender and vehicle age. Sales tax treatment varies by state/country (some tax the full price, others tax price minus trade-in). Not financial advice.

How the Auto Loan Calculator Works

The amount you actually finance is the vehicle price plus sales tax, minus your down payment and trade-in. We then apply the standard reducing-balance amortisation formula to compute a fixed monthly payment over your chosen term. Each month, interest is charged on the remaining balance and the rest of your payment chips away at the principal — so early payments are interest-heavy and later ones are principal-heavy.

What's a Good Auto Loan APR?

As of May 2026, US averages from Experian Q1 data are around 7.0% for new cars and 11–13% for used with prime credit. UK PCP/HP rates sit at 6–9% and EU averages at 5–7%. Your credit score is the single biggest lever — moving from "fair" to "very good" credit can cut your rate by 3–6 percentage points, which on a $30,000 60-month loan saves around $3,000 in interest.

Down Payment & Trade-In

Aim for at least 20% down on a new car or 10% down on a used car. This protects you from negative equity (owing more than the car is worth) which is a real risk because cars depreciate fastest in their first three years. Your trade-in counts the same as cash down — but get a written valuation from CarMax / WeBuyAnyCar before going to the dealer so you have a benchmark.

Loan Term Trade-Off

Longer terms cut the monthly payment but cost more total. A $30,000 loan at 8% APR costs about $5,200 in interest over 60 months ($608/mo) versus $9,000 over 84 months ($449/mo). The 84-month option also keeps you underwater longer because depreciation outpaces your principal payments — bad if you need to sell or total the car early.

Tips to Lower Your Auto Loan Cost

Get pre-approved by a credit union or bank before visiting the dealer — use it to negotiate
Shop the price and the financing separately; dealers profit from both
Improve your credit score 60–90 days before applying — pay down cards to under 30% utilisation
Choose the shortest term you can comfortably afford
Make biweekly payments instead of monthly — that's one extra payment per year
Avoid add-ons (extended warranty, gap insurance, paint protection) financed into the loan

⚠️

Important Note: This tool provides estimates. Actual rates and terms depend on your credit profile, lender criteria, vehicle, and local taxes. Always get firm quotes in writing from at least three lenders before signing a finance agreement.

Related Calculators

Lease vs Buy Car Calculator — True total cost of leasing versus financing — residual value, money factor and resale equity.
Fuel Cost & MPG Calculator — Trip fuel cost, vehicle MPG / L/100km, cost per mile and annual fuel spend. Petrol, diesel and hybrid.
EV Charging Cost Calculator — Cost per charge, per mile and annual electric running cost vs petrol. Home, public, rapid mix.