Calculate your monthly car loan payments, total interest costs, and compare different financing options. Make informed decisions when purchasing your next vehicle.
A 2% difference in interest rate on a $25,000 loan can save over $1,500 in interest over 5 years.
Shorter terms save interest but increase monthly payments. Consider your budget and depreciation.
Larger down payments reduce monthly payments, total interest, and help avoid negative equity.
Auto loans are installment loans with fixed monthly payments. Key components include:
Financing arranged through the dealership. May offer promotional rates.
Direct lending from financial institutions. Typically lower rates for qualified buyers.
Digital lenders offering quick approval and competitive rates.
Vehicles depreciate quickly, especially in the first few years. Understanding this helps avoid negative equity:
As of 2024, excellent credit (720+) typically gets 3-5%, good credit (660-719) gets 5-7%, average credit (620-659) gets 7-10%, and below 620 may see 10%+. Rates vary by lender, loan term, and economic conditions.
3-year loans have higher payments but lower total interest and help avoid negative equity. 6-year loans have lower payments but cost more in interest and may result in owing more than the car's value (negative equity). Consider your budget and how long you plan to keep the vehicle.
The 20/4/10 rule is a good guideline: 20% down payment, 4-year maximum term, and monthly payment ≤10% of gross income. Also consider total transportation costs (insurance, fuel, maintenance) which should be ≤15-20% of monthly income.
Interest rate is the cost of borrowing principal. APR (Annual Percentage Rate) includes interest plus fees, giving you the true cost of the loan. Always compare APRs when shopping for loans.
