How to Use an Auto Loan Calculator to Estimate Car Payments

It’s easy to use our auto loan calculator to estimate your monthly car payment.  You just need a few pieces of information and you can find out how purchasing a car will impact your budget.  Auto loan calculators allow you to input basic information and get a result which takes all of your information and returns a monthly car payment amount.  Be sure you use accurate information because each value you enter into the auto loan calculator will affect the estimated car payment. Remember that any auto loan calculator should only be used to estimate your financial situation.  You should speak with a qualified financial professional before making any key decisions.  An auto loan calculator can be a powerful tool to help arm you with information so you can make better decisions when you are purchasing a vehicle.

In order to use our auto loan calculator, you need to have at least three important pieces of information ready to enter into the fields:

Auto Loan Calculator – Required Inputs

  • Price of the Car – The amount you will pay for your new or used car.
  • Interest Rate – The annual interest rate that your bank, credit union or the auto dealer is charging you for the loan.
  • Term – The number of years your loan will be for.  Typically loans are for 3, 4, 5 or even 6 years.

There are other pieces of information that will impact your estimated monthly car payment.  If any of the following items will apply to your loan or vehicle purchase, you should enter them in the auto loan calculator:

Auto Loan Calculator – Optional Inputs

  • Down Payment – The amount of cash you plan to spend upfront.  This amount reduces the amount you need to borrow.
  • Rebate – Any savings, incentives or reductions in price that the seller is passing along to you.  These amounts will also reduce the amount you need to borrow.
  • Value of Trade-In – The amount that the seller of the vehicle is giving you to account for your trade in.
  • Amount Owed on Trade-In – The amount of any loan you have on the car you are trading in.  The seller will payoff the loan value you for you as a part of the transaction.
  • Sales Tax Rate – If you live in a state that charges sales tax, you should enter in the annual rate.  The sales tax will be applied to the price of the car before any reductions or incentives you receive.

Once you’ve entered in all the inputs into the auto loan calculator, all you need to do is click the “calculate” button.  Our auto loan calculator provides lots of valuation information that will help you make a decision on your auto financing.

Auto Loan Calculator – Results Summary

  • Estimated Monthly Payment – The amount you will be required to pay each month.
  • Date of Payoff – The month you will make your final monthly auto loan payment.
  • Total Loan Amount – The actual amount you borrowed from a bank or credit union.  This takes into account the price of the car, your down payment, sales tax, your trade in and any incentives.
  • Total Interest Paid – The total amount of interest expense you will have paid over the life of the loan over and above the repayment of the actual loan itself.
  • Total Payments – The total of all your monthly payments over the life of the loan.  Your total payments will equal your total loan repayment plus the total interest you will have paid.

When you make a car payment, part of the payment covers the amount of interest expense you incurred that month.  The remaining amount of your monthly payment is applied towards your remaining loan balance.  Each month, your lender applies an amount for interest expense and reducing your outstanding auto loan balance.  As your balance decreases each month, the amount of interest expense the following month is also reduced.  Since your monthly payment amount stays the same, you reduce your loan balance by larger amount each month.  By the time you make your last payment on your auto loan, almost all of the payment is applied to principal reduction because at that point your interest expense is a very small portion of your payment.   The auto loan calculator takes all of this into account and will return an estimated monthly payment to you that will bring your loan balance to zero at the end of the loan term.

Using Auto Loan Calculators to Compare and Make Decisions

One of the most useful things you can do with an auto loan calculator is to see the different in monthly payments and other factors if you change different inputs.  The change in some variables can have a big impact on your monthly budget.  For example, let’s assume you are buying a car with a price of $25,000.  You are going to finance the car for 5 years at an interest rate of 4%.  You are trying to decide whether or not you should put nothing down or make a down payment of $5,000.  If you don’t make a down payment, your monthly payment will be $460.41 and your total interest expense will be $2,624.78 over the life of the loan.  If you put $5,000 down, your monthly payment will be $368.33 and your total interest expense would be $2,099.83.  So by making a down payment, your monthly payment would be $92 less and you would save $524.95 in total interest expense over the life of the auto loan.  You can also use the auto loan calculator to vary things like price of the car or changes in interest rate.