Calculating Your Car Loan
A car loan calculator helps you determine the monthly payment for your vehicle purchase. Auto loans typically range from 2 to 7 years, with interest rates depending on credit score, loan term, and whether you're buying new or used. Making a larger down payment reduces your loan amount and can help you avoid being underwater on your loan.
The total cost of a car includes more than just the purchase price and interest. Factor in insurance, maintenance, gas, and registration fees. A common rule is the 20/4/10 rule: put 20% down, finance for no more than 4 years, and keep total transportation costs under 10% of gross income. This helps ensure you can comfortably afford your vehicle.
Interest rates on auto loans are generally lower than personal loans because the vehicle serves as collateral. New car loans typically have lower rates than used car loans. Credit unions often offer competitive rates compared to banks and dealerships. Always get pre-approved before shopping to understand your budget and strengthen your negotiating position.
Quick Tips
- Always compare APR, not just interest rates
- Use the Rule of 72 to estimate doubling time
- Extra payments dramatically reduce total interest
Frequently Asked Questions
Aim for at least 20% down on a new car or 10% on a used car. This reduces your loan amount, lowers interest charges, and helps prevent being underwater if the car depreciates faster than you pay down the loan.
As of 2024, excellent credit (720+) can secure rates around 4-6% for new cars. Average credit (650-719) sees 6-10%, while lower credit scores may face 10-15% or higher.
Compare offers from both. Dealers sometimes offer promotional 0% financing, but often on shorter terms or specific models. Banks and credit unions may offer better rates for your situation.
Ideally 4 years or less to minimize interest and avoid owing more than the car's worth. Longer terms mean lower payments but much higher total cost and risk of negative equity.
Yes, refinancing can lower your rate if your credit has improved or rates have dropped. Avoid extending the term significantly, as this increases total interest despite lower payments.