Investopedia Auto Loan Calculator

This auto loan calculator helps you estimate monthly payments, total interest costs, and loan affordability. Simply enter your loan amount, interest rate, and loan term to get instant results.

How to Use This Calculator

Using the auto loan calculator is simple:

Enter the loan amount in dollars (e.g., 25000)
Input the annual interest rate (e.g., 4.5)
Select the loan term in years (e.g., 5)
Click "Calculate" to see your results

The calculator will display your estimated monthly payment, total interest paid, and total amount paid over the life of the loan.

Formula Explained

The auto loan calculator uses the standard loan payment formula:

Monthly Payment = P × (r(1+r)^n) / ((1+r)^n - 1)

Where:

P = Principal loan amount
r = Monthly interest rate (annual rate divided by 12)
n = Number of payments (loan term in years × 12)

This formula calculates the fixed monthly payment required to pay off the loan in the specified term.

Worked Example

Let's calculate a $25,000 loan at 4.5% annual interest for 5 years:

Principal (P) = $25,000
Annual interest rate = 4.5% or 0.045
Monthly interest rate (r) = 0.045/12 ≈ 0.00375
Number of payments (n) = 5 × 12 = 60

Plugging these into the formula:

Monthly Payment = 25000 × (0.00375(1+0.00375)^60) / ((1+0.00375)^60 - 1)

≈ $454.23 per month

Total interest paid over 5 years: $2,230.20

Total amount paid: $27,230.20

Frequently Asked Questions

What is an auto loan?: An auto loan is a type of secured loan used to purchase a vehicle. The vehicle serves as collateral for the loan.
How does the interest rate affect my monthly payment?: A higher interest rate will increase your monthly payment and total interest costs. Conversely, a lower interest rate will reduce these amounts.
Can I pay off my auto loan early?: Yes, most auto loans allow prepayment without penalty. Paying off early can save you money on interest.
What is the difference between APR and interest rate?: APR (Annual Percentage Rate) includes all fees and costs associated with borrowing, while the interest rate is the actual cost of borrowing.
How can I lower my auto loan payments?: You can lower payments by increasing the loan term, making larger down payments, or negotiating a lower interest rate.