Bizrate Auto Loan Calculator

How to Use This Calculator

To get accurate results, follow these steps:

1. Enter the loan amount you're considering
2. Select your loan term in years
3. Input the interest rate (APR) offered
4. Click "Calculate" to see your results

The calculator will display your estimated monthly payment, total interest paid over the loan term, and the total cost of the loan. You can also view a breakdown of how your payments are allocated between principal and interest.

Formula Used

This formula accounts for the fact that each payment includes both principal and interest, with the interest portion decreasing over time as the principal balance is paid down.

Worked Example

Let's calculate a loan with these parameters:

• Loan amount: $25,000
• Loan term: 5 years
• Interest rate: 4.5% APR

Using the formula:

1. Convert annual rate to monthly: 4.5% ÷ 12 = 0.375% or 0.00375
2. Calculate number of payments: 5 × 12 = 60
3. Plug values into formula: M = 25000 [ 0.00375(1 + 0.00375)⁶⁰ ] / [ (1 + 0.00375)⁶⁰ - 1 ]
4. Calculate the monthly payment: $452.34

Over 5 years, you would pay a total of $27,140.40, with $2,140.40 going to interest.

Interpreting Results

When reviewing your results, consider these key points:

1. Monthly Payment: This is the amount you'll pay each month. Compare this with your budget to ensure affordability.
2. Total Interest: This shows how much extra you'll pay beyond the original loan amount. Lower interest rates save you money.
3. Total Cost: This combines the principal and interest to show the complete financial commitment.
4. Payment Breakdown: The chart shows how your payments are split between principal and interest over time.

Remember that these are estimates. Actual payments may vary slightly based on your lender's specific calculation methods and any additional fees.