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.
Using this as an auto loan payoff calculator
The other way to cut the interest bill is to leave the term alone and pay more than the payment asks for. Open the optional extra payment field above and the schedule is reworked: the scheduled payment stays where it is, the balance falls faster, and the loan finishes early. The same $35,000 at 7% over 72 months:
| Extra each month | Loan ends after | Total interest | Interest saved |
|---|---|---|---|
| Nothing | 72 payments | $7,963.44 | — |
| $50 | 66 payments | $7,180.25 | $783.19 |
| $100 | 60 payments | $6,539.85 | $1,423.59 |
| $200 | 51 payments | $5,554.42 | $2,409.02 |
| $300 | 45 payments | $4,832.10 | $3,131.34 |
An extra $100 a month turns the six-year loan into a five-year one. The saving comes from the balance being smaller every month, so there is less of it left to charge interest on.
It does not scale the way people hope. Clearing a seven-year loan in three years is the question people actually ask, and on a $35,000 loan at 7% the answer is roughly $553 a month on top of the $528.24 payment. That is about $1,081 a month in total, which is very nearly what a three-year loan on the same car would have cost in the first place, at $1,080.70. There is no trick in it: paying a loan off in three years costs three-year money.
Three things to check before you overpay
- Find out whether your loan uses simple interest. That means interest is charged on the balance you still owe, and the CFPB says it is far more common on car loans. The rarer alternative is precomputed interest, where the whole interest bill is worked out at the start and split across the payments. On a precomputed loan the CFPB says making extra payments does not reduce the principal or interest owed, so the table above would not describe your loan.
- Say what the extra money is for. A payment normally covers any fees first, then the interest due, then the principal. The CFPB notes you may be able to ask your lender or servicer to apply more of it to the principal. Send extra without saying so and it can simply be booked as your next payment arriving early, which shortens nothing.
- Read the contract for a prepayment penalty. The CFPB says your contract and state law decide whether you can pay an auto loan off early without a penalty, and that such a penalty is there to discourage exactly this. The contract and its Truth in Lending disclosures are where it would be written down.
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, equal payments and interest charged on the balance still outstanding, which is how nearly all car loans in the US work; a precomputed-interest loan behaves differently once you overpay. It does not model a lease, where you are paying for the value the car loses rather than buying it.