Online Free Auto Loan Calculator
Auto Loan Calculator
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Loan Summary
| Payment # | Principal | Interest | Balance |
|---|
What is an Auto Loan?
An auto loan is a secured loan where the car itself acts as collateral. You borrow money from a lender to purchase a vehicle and repay it over time with interest. If you default, the lender can repossess the car.
Key components:
- Principal: The amount borrowed.
- Interest rate (APR): The cost of borrowing, expressed annually.
- Loan term: The repayment period (commonly 36–72 months).
- Monthly payment: Combination of principal + interest.
- Fees: Origination, documentation, or dealer markups.
Auto Loan Market in the USA
- Outstanding auto loan debt (2025): Over $1.6 trillion.
- Average loan term: 68 months for new cars, 65 months for used.
- Average APR:
- New cars: ~6.5% (prime borrowers)
- Used cars: ~11% (subprime borrowers)
- Credit score impact: Borrowers with scores above 720 often secure rates under 5%, while subprime borrowers (>620) may face 15–20% APR.
How Auto Loans Work: The Formula
Monthly payment is calculated using the amortization formula:
Where:
- MM = monthly payment
- PP = loan principal
- rr = monthly interest rate (APR ÷ 12)
- nn = total number of payments
Example:
- Loan: $30,000
- APR: 6%
- Term: 60 months
Total repayment ≈ $34,800 (≈ $4,800 in interest).
Types of Auto Loans in the USA
| Loan Type | Description | Best For |
|---|---|---|
| Bank loan | Traditional financing with competitive rates for good credit. | Prime borrowers. |
| Credit union loan | Member-owned, often lower rates and flexible terms. | Community-focused borrowers. |
| Dealer financing | Convenient, but may include markups. | Buyers prioritizing speed. |
| Online lenders | Fast pre-approvals, competitive rates. | Tech-savvy borrowers. |
| Buy Here, Pay Here (BHPH) | In-house dealer financing, very high rates. | Subprime borrowers with no alternatives. |
New vs Used Car Loans
- New cars: Lower APRs, longer terms, but higher depreciation.
- Used cars: Higher APRs, shorter terms, but lower purchase price.
👉 Example:
- New car loan: $35,000 at 5% APR, 72 months → $564/month.
- Used car loan: $20,000 at 9% APR, 60 months → $415/month.
Even though the used car has a higher APR, the total cost is lower.
Factors That Affect Auto Loan Rates
- Credit score – The single biggest factor.
- Loan term – Longer terms = higher rates.
- Down payment – Larger down payment reduces risk.
- Debt-to-income ratio (DTI) – Lenders assess repayment ability.
- Vehicle type – New vs used, luxury vs economy.
- Lender type – Banks, credit unions, and online lenders vary.
Auto Loan vs Lease
| Feature | Auto Loan | Lease |
|---|---|---|
| Ownership | You own the car after payoff | You return the car |
| Monthly payment | Higher | Lower |
| Mileage limits | None | Strict limits |
| Customization | Allowed | Not allowed |
| Best for | Long-term ownership | Short-term use, always driving new cars |
Refinancing Auto Loans
Refinancing means replacing your current loan with a new one, ideally at a lower rate.
- When to refinance:
- Credit score improved.
- Interest rates dropped.
- You want to shorten/extend the term.
- Example: Original loan: $25,000 at 10% APR, 60 months → $531/month. Refinanced at 6% APR → $483/month. Savings: ~$2,880 over the loan term.
Common Mistakes to Avoid
- Focusing only on monthly payment: Dealers may extend terms to lower payments, but you’ll pay more in interest.
- Skipping pre-approval: Walking into a dealership without financing makes you vulnerable to markups.
- Rolling negative equity: Adding old loan debt into a new loan increases risk.
- Ignoring total cost: Always calculate total repayment, not just monthly affordability.
U.S. Auto Loan Regulations
- Truth in Lending Act (TILA): Requires lenders to disclose APR and total cost.
- Equal Credit Opportunity Act (ECOA): Prohibits discrimination in lending.
- State usury laws: Limit maximum interest rates.
Auto Loan Trends in 2025
- Rising interest rates: Driven by Federal Reserve policy.
- Longer loan terms: 84-month loans are increasingly common.
- EV financing: Special programs for electric vehicles, including federal tax credits.
- Digital lending: Online pre-approvals and instant credit checks dominate.
FAQs
Q: What’s the average auto loan interest rate in the USA? A: Around 6–7% for new cars and 10–12% for used cars, depending on credit score.
Q: Can I get an auto loan with bad credit? A: Yes, but expect higher APRs (15–20%). Credit unions and subprime lenders may help.
Q: Is it better to finance through a dealer or bank? A: Banks/credit unions usually offer lower rates, while dealers offer convenience.
Q: How long should my auto loan term be? A: 60 months is a balanced choice. Longer terms lower payments but increase interest.
Q: Can I pay off my auto loan early? A: Yes, but check for prepayment penalties.