Car Loan Calculator

A car loan is repaid in equal monthly payments. Each payment first covers that month's interest on what you still owe, and the rest pays down the loan. What you borrow is the car price, minus your down payment, trade-in and any rebate, plus any sales tax and fees you choose to add to the loan.

The formula

amount borrowed = price − down payment − (trade-in − still owed) − rebate + tax and fees (if added to the loan)
monthly rate = yearly rate ÷ 12 ÷ 100
monthly payment = amount borrowed × monthly rate ÷ (1 − (1 + monthly rate)^−months)
with a balloon: use (amount borrowed − balloon ÷ (1 + monthly rate)^months) in place of the amount borrowed
total interest = all payments − amount borrowed

Worked example

A $30,000 car with $3,000 down leaves $27,000 to borrow. At 7% a year the monthly rate is 7 ÷ 12 ÷ 100 = 0.005833. Over 60 months, (1.005833)⁻⁶⁰ = 0.7054, so the payment is $27,000 × 0.005833 ÷ (1 − 0.7054) = $534.63 a month. Sixty payments add up to $32,077.94, so the interest is $5,077.94.

Trade-ins, tax and fees

If your old car is worth $5,000 and you still owe $2,000 on it, it knocks $3,000 off the loan. If you owe more than it's worth (negative equity), the difference is added to the new loan, so you pay interest on it too. Many US states and Canadian provinces charge sales tax only on the price minus your trade-in; others tax the full price. Pick the one that fits where you buy. Rebates are taken off the loan, but in most places sales tax is still worked out on the price before the rebate.

Example: $30,000 price, $3,000 down, the $5,000 trade-in with $2,000 owed, 8% tax on price minus trade-in ($2,000), $500 of fees and a $1,000 rebate, all added to the loan: you borrow $30,000 − $3,000 − $3,000 − $1,000 + $2,000 + $500 = $25,500, which is $504.93 a month at 7% for 60 months.

Cash back or a low rate?

Makers often offer either cash back or cheap finance, not both. $2,000 cash back on the $27,000 loan at 7% for 60 months costs $29,702 in payments in all. A 0.9% deal with no cash back costs $27,622, so the low rate wins by about $2,080. The two cost the same if your own rate is about 4.0%, so cash back only wins below that. Advanced mode shows this side by side for your numbers.

Balloon or PCP finance

With a balloon (common in the UK and Europe as PCP), you pay lower monthly payments and one big final payment, which you can pay, refinance or (on PCP) settle by handing the car back. $27,000 at 6% over 48 months with a final payment of 30% of the $30,000 price ($9,000) costs $467.73 a month, against $634.10 without a balloon. You pay more interest overall ($4,451 vs $3,437) because the balance stays higher for longer.

How a lease payment is worked out

depreciation = (agreed price + acquisition fee − down payment − trade-in − rebate − residual) ÷ months
rent charge = (that adjusted price + residual) × money factor
money factor = APR ÷ 2400
monthly payment = (depreciation + rent charge) × (1 + sales tax)

Example: a $30,000 car (list price $32,000), 55% residual ($17,600), $650 acquisition fee, $2,000 down, 6% APR (money factor 0.0025), 36 months, 8% tax. Adjusted price = $30,000 + $650 − $2,000 = $28,650. Depreciation = ($28,650 − $17,600) ÷ 36 = $306.94. Rent charge = ($28,650 + $17,600) × 0.0025 = $115.63. Payment = $422.57 + 8% tax = $456.38 a month.

Lease vs buy

Over the lease term, the lease costs everything you pay: the down payment, the monthly payments, fees and any mileage charges, and you own nothing at the end. Buying costs the cash you pay in the same months, minus what you own at the end: the car's value less any loan still owed. We use the residual value as the car's value unless you enter your own. Leasing usually wins if you want a new car every few years; buying usually wins if you keep the car long after the loan is paid off.

• A bigger down payment cuts the interest, but on a lease it's lost if the car is written off early.
• Check the rate and term together: a longer term lowers the payment but raises the total interest.
• Lease mileage limits are often 10,000–15,000 miles (16,000–24,000 km) a year; going over is charged per mile or km.

Assumes a fixed rate and monthly payments. Taxes, fees and how rebates and trade-ins are taxed vary by country, state and dealer, so check your quote. Your lender's figures may differ slightly because of rounding or the date of the first payment.