Work out what you are actually borrowing
The number that goes into a car loan calculator is not the sticker price. Start with the price you agreed, add the things being financed with it, then take off what you are putting in:
- Price of the car, after you have negotiated it.
- Plus sales tax, title, registration and any dealer fee you are financing rather than paying up front.
- Minus your down payment.
- Minus the trade-in value, or plus the shortfall if you still owe more than the trade-in is worth.
That total is the loan amount. Enter it above with the APR you have been offered and the term in months, and the payment appears as you type.
What a longer term really costs
Stretching the term is the standard way to make a monthly payment fit a budget, and it works. It is just expensive. Take a $35,000 loan at 7%:
| Term | Monthly payment | Total interest |
|---|---|---|
| 48 months | $838.12 | $5,229.68 |
| 60 months | $693.04 | $6,582.56 |
| 72 months | $596.72 | $7,963.44 |
Going from four years to six drops the payment by $241 a month and adds $2,733 to the interest bill. Both of those are real. Which one matters more depends on whether the shorter payment would leave you with nothing spare, and that is a judgement about your budget rather than about the loan.
Watch the APR, not the monthly payment
A dealership can lower a monthly payment in three ways: cut the price, cut the rate, or lengthen the loan. Only the first two save you money. If you are quoted a payment rather than a rate, ask for the APR and the term, put them in above, and check the total. A rate that is a couple of points lower is worth more than it looks, because it applies to every month of the loan.
What this calculator leaves out
It prices the loan and nothing else. Insurance, fuel, maintenance, an extended warranty or gap cover sold alongside the finance are all real costs of running the car, but they are not part of the loan and they do not belong in the amount you borrow unless you are genuinely financing them. It also assumes a fixed rate and equal payments, which is how nearly all car loans in the US work. It does not model a lease, where you are paying for the value the car loses rather than buying it.