Car Interest Calculator

Whether the car you’re purchasing is brand new or used, chances are, you’re going to need to take an auto loan calculator to help with financing. This car interest calculator will help you answer the following questions:

• How much interest will I pay on my car loan?
• What’s the difference between principal and interest?
• What affects the car loan interest rate?

Make sure to head to our car lease calculator if you’re interested in leasing a vehicle instead of purchasing it.

The total amount of money you borrowed, called the loan amount in our calculator, is your starting point. This is the money you will have to repay to the institution you borrowed from (for example, a bank or a car dealership).

Naturally, that’s not all. On top of that, you will have to consider the interest, which is how the bank makes money on your loan. The interest is expressed as a percentage (%).

The interest has a compounding effect. It means that the longer the loan term, the more total interest is paid. That’s why it makes sense to pay off your debts early — not only are you debt-free earlier, but you also mitigate the compounding effect.

Let’s see which formulas we use in the car interest calculator. First, you need to find the monthly payment:

where:

• $M$ — Monthly payment;
• $\mathrm{LA}$ — Loan amount, also called the principal;
• $R$ — Monthly interest rate, calculated as the annual interest rate divided by 12; and
• $T$ — Term, expressed in number of payments (usually, number of months).

To calculate the total interest $\mathrm{TI}$ on your car loan, use this formula:

Car loans typically use simple interest. In this case, the monthly interest, $\mathrm{MI}$, is given by the following formula:

where:

• $\mathrm{RB}$ — Remaining balance of the loan; and
• $R$ — Monthly interest rate (annual interest rate divided by 12).

As you can see, the monthly interest rate value depends on the remaining balance. Thus, the interest regularly decreases each month.

Our car interest estimator is quick and simple to use. If you still have problems understanding our tool, check the instructions below:

1. Enter the loan amount. Expand the Calculate the loan amount section if you don’t know it. Then enter the car’s price, down payment, and the trade-in value of an old car to calculate the loan amount.
2. Type in the interest rate (annual).
3. Enter the loan term in years/months.
4. The car interest calculator will show you the monthly payment and total interest you will pay.

The most important factor affecting your interest rate is your credit score. If you have an excellent credit score and a great credit history, you will typically receive a much lower interest rate, as you will be considered a lower-risk customer.

Additionally, the type and age of your purchased car will influence the interest rates. New cars have a better resale value, and therefore present a lower risk to lenders; hence, the interest rate on a new car might be lower than on a used one. However, the price of a new car will be much higher than that of a second-hand one.

To determine what kind of vehicle you can realistically afford, make sure to check out our car affordability calculator.

Every lender will determine interest rates differently, so we highly recommend comparing offers before choosing your car loan! Banks, online lenders, and dealership financing — they all differ from each other. This car interest estimator will definitely help you compare the offers and choose the most affordable one.

This number depends heavily on where in the world you are and on the economic conditions, which can vary wildly from year to year. However, we can present some average interest rates for US citizens.

You can find typical car loan interest rates below:

• Rates between 4% and 7% for drivers with excellent credit scores;
• Rates between 6% and 9% for those with good credit scores; and
• Rates as high as 15% for those with poor credit scores.

Remember that the interest rate you will get will depend on your credit score, on the type of car you’re purchasing, and plenty of other factors. Two people buying the same car might receive vastly different offers from the same lenders.

If you make a mistake choosing an offer, remember that you can usually refinance a car loan!