How to Calculate a Car Loan
Our online car loan calculator will help you work out just how much your monthly car loan repayments will actually be. This calculator will also display an illustration of how much you should expect to repay on a monthly basis. When taking out a car loan, you should:
- Use our interest calculator to provide you with an illustration of your monthly car loan repayment amounts for different terms and interest rates.
- Before you commit to a car loan agreement, review the car loan borrowing considerations.
Our car loan calculator will calculate your monthly interest repayment over several years then compare them to a separate monthly repayment period, which you can choose.
Car Loan Formula
The Car Loan Calculator uses the following basic formula:
Monthly Car Loan Payment = { Rate + Rate / [(1 + Rate) months -1] } x Principal Car Loan Amount
Where:
Rate (Monthly Interest Rate) = Decimal Rate / 12 , or Rate = (Annual Interest Rate / 100) / 12
Things to Consider When Taking Out a Car Loan
- Affordable: Make sure that you are able to afford the repayments that are to come on your car loan. You are the only one who really knows whether or not you can invest in a new car, and whether or not taking out loans will only cause more financial struggles in the future.
- Look At Different Companies: Before you even consider the loan, take a look at a variety of different companies. Check out both banks and lender companies. Find out how flexible they are as a business, and the rates that they offer. Be careful when looking at car dealerships when taking out a loan, banks are usually quite a bit cheaper than car dealerships.
- Research: It's important to research on better deals. It's not uncommon for to banks run promotions at certain times of the year, so never presume that one bank is better than the other. Banks are a lot cheaper when it comes to interest than car dealerships.
- Interest Rates: Make sure you fully read into the interest rates applied to the car loan. You may think that you are getting an incredibly deal with a low-interest rate, but on the other hand you may have to pay that loan off for another couple of years meaning you are paying a noticeably larger amount.
- Borrow Little, Repay Quickly: It's important that you don't get out of your depths with your loan. Borrow the minimum amount you need to take out the loan, and repay it as soon as you can.
- Pay Day Loans: Never use a Pay Day lender, this is a fantastic way to completely destroy your financial credibility. These lenders have no consideration of your well-being and will help destroy your financial situation as long as it benefits them. Avoid them at all costs.
- Don't Lend at All: Although it may be difficult in the current day and age, try to avoid taking out a loan all together. It may be tempting to get that little extra money to buy your car, but it will feel a lot better if you earn the money yourself.
- Choose Between a Personal Loan or a Car Loan: Again, do your research. Although personal loans usually offer far better interest rates than car loans. Car dealerships are known to push you towards taking out loans which have a ridiculous APR rate. When you are looking to invest in buying a new car, be patient and look at different lenders.
- Personal Contract Purchase (PCP): PCP's are becoming increasingly popular over recent years. This is because they allow there to be no deposit required for a loan. Although PCP's are often a good choice, be aware of the risks you are taking with them. These risks consist of:
- Understand that you do not own the company. The car is the legal responsibility of the financial company and definitely not you. Until you have paid the final payment, you do not own the car.
- There are normally mileage restrictions included in PCP contracts. This restriction is usually annually and if you exceed the limitation you will be subject to being charged additional fees if you choose not to pay the final payment.
- Once you have signed the contract and choose that it is no longer the car you want, or your overall circ*mstances change, you are able to cancel the contract although there are fees including in doing that.
- As much as you want to, you cannot make any modifications to the vehicle. New wheels? Tinted windows? Don't as much as think about it. Remember, it isn't your car, you can't make these sorts of changes to it.
You may also be interested in our free Car Depreciation Calculator
FAQs
Calculators Only Provide Estimates
Because they are dependent on the accuracy of the information you enter, they may be different than what a dealership will really offer you. The best use for these calculators is in helping you compare cars.
Are personal loan calculators accurate? ›
A personal loan calculator can estimate the loan amount and interest rate you may be eligible for, but it cannot determine your actual loan eligibility. Your credit score and income will be important factors in evaluating loan eligibility.
Are online loan calculators accurate? ›
However, these calculators should be taken with a grain of salt. They can give you a rough estimate as to how much you can expect to pay, but they can't give you an exact amount. There are too many variables that can change and affect your exact monthly price.
How do you calculate how much car loan I can afford? ›
It depends on how much income you have after your bills and expenses. But as a rule of thumb, your car payment should not exceed 15% of your post-tax monthly pay. For example, if after taxes, you make the U.S. median income of $37,773, you could shop for a car that costs up to $472 per month.
What score do most auto lenders use? ›
Most lenders use FICO, which ranges from 300 to 850. VantageScore is less common but still ranges from 300 to 850. Both scores use a mix of your credit history, amount owed, balances and available credit — just weighted differently. Some auto lenders also use a version of the FICO score called FICO Auto Score.
What is a good APR for a car calculator? ›
How to use the auto loan calculator
| Credit score | Average APR, new car | Average APR, used car |
|---|
| Superprime: 781-850. | 5.64%. | 7.66%. |
| Prime: 661-780. | 7.01%. | 9.73%. |
| Nonprime: 601-660. | 9.60%. | 14.12%. |
| Subprime: 501-600. | 12.28%. | 18.89%. |
2 more rowsMonthly payments for a $100,000 mortgage
| Annual Percentage Rate (APR) | Monthly payment (15-year) | Monthly payment (30-year) |
|---|
| 6.25% | $857.42 | $615.72 |
| 6.50% | $871.11 | $632.07 |
| 6.75% | $884.91 | $648.60 |
| 7.00% | $898.83 | $665.30 |
5 more rowsFor example, for a $60K personal loan, for a term of 30-years with an annual percentage rate of 6% , the estimated monthly payment would be about $360, while a 15-year loan at an annual percentage rate of 3.5% would have an estimated monthly payment of about $429.
Is 7% a good rate for a personal loan? ›
The lowest personal loan rates start around 7% and go to borrowers with strong credit histories, high incomes and low existing debt. Compare interest rates on. 35+ personal loans reviewed and rated by our team of experts.
How much house can I afford if I make $70,000 a year? ›
As a rule of thumb, personal finance experts often recommend adhering to the 28/36 rule, which suggests spending no more than 28% of your gross household income on housing. For someone earning $70,000 a year, or about $5,800 a month, this means a housing expense of up to $1,624.
So, to determine if a calculator is accurate, you simply need to know the true value of a calculation, then compare that to the answer of the same calculation that the calculator makes . Put simply, we all know that the true answer to 2+2 is equal to 4.
Are calculators always accurate? ›
The use of calculators is commonplace in many areas of life and work including science, engineering, finance, economics, accounting, and more. But even the most accurate calculator can produce inaccurate results if not used correctly.
How much car can I afford on a $60000 salary? ›
How much should I spend on a car if I make $60,000? If your gross salary is $60,000, your take-home monthly pay is probably around $3,750, assuming about 25% of your pay goes toward taxes and other expenses. Based on the 10-15% calculation, you should spend no more than $562.50 on a monthly car payment.
How much income to afford a 50k car? ›
If you wanted to stick to this rule of thumb and buy a $50,000 car, you would need a monthly take-home income of at least $7,240 if you got a car loan at a below-average rate and stretched out your payoff time for a long time. Many people will find that purchasing such an expensive car really isn't affordable.
How much do I have to make to afford a $40 K car? ›
With a minimal cash down payment of $1000 a $40k car would cost you about 650–700 per month. An income of $35–45k per year would work in that scenario.
What would payments be on a $20,000 car loan? ›
For instance, using our loan calculator, if you buy a $20,000 vehicle at 5% APR for 60 months the monthly payment would be $377.42 and you would pay $2,645.48 in interest.
Is 84-month car payment bad? ›
For most borrowers, an 84-month auto loan may not be the best idea due to high interest rates, increased risk and vehicle depreciation. However, an 84-month auto loan can be a good idea for borrowers who need lower monthly payments.
Are 84-month loans worth it? ›
There are some significant drawbacks to taking on an 84-month car loan. Before you choose this option, consider these cons: High interest payments: An 84-month loan will likely be more expensive than a shorter-term loan. Even though you'll have a lower monthly payment, you'll be paying interest over a longer period.
How much is a 30 000 car payment for 60 months? ›
If you took out a $30,000 new auto loan for a 60-month term at 5.0% interest, then your monthly payment would be $566.14. Note: Although your monthly payments won't change during your loan term, the amount applied to principal versus interest will vary based on the amortization schedule.
