David is a Chartered Financial Analyst and a former finance manager in the automotive lending industry, specializing in auto loan structures and risk assessment.
This 4-in-1 Auto Loan calculator helps you find the right car budget. Enter any three values—Loan Amount, Annual Rate, Term, or Monthly Payment—and we will solve for the fourth.
Auto Loan Calculator
Auto Loan Amortization Formulas
i = R / 12 / 100 (Monthly Rate)
n = T * 12 (Number of Months)
Solve for Monthly Payment (M):
M = P * [ i(1 + i)^n ] / [ (1 + i)^n – 1 ]
Solve for Loan Amount (P):
P = M * [ (1 + i)^n – 1 ] / [ i(1 + i)^n ]
Solve for Term (n):
n = log( M / (M – P*i) ) / log(1 + i)
Solve for Rate (i):
(No direct formula; solved iteratively)
Formula Variables
- (P) Loan Amount: The total amount financed (vehicle price minus down payment, plus fees/taxes).
- (R) Annual Rate: The Annual Percentage Rate (APR) for the auto loan.
- (T) Loan Term: The total number of years to repay the loan (e.g., 4, 5, 6 years).
- (M) Monthly Payment: The fixed monthly payment (principal + interest) for the car loan.
Related Calculators
- Loan Affordability Calculator
- Personal Loan Calculator
- Loan to Value (LTV) Calculator
- General Loan Amortization Calculator
What is an Auto Loan Calculator?
An auto loan calculator is a tool designed to help you understand the finances behind buying a car. It uses the same amortization formula as a mortgage but is tailored to the specific variables of a car purchase: the loan amount, interest rate (APR), and loan term (usually 3-7 years).
Using this calculator is a critical first step *before* you go to a dealership. A salesperson will often focus on the monthly payment (“We can get you in this car for $700 a month!”). They might achieve this by extending the loan term to 7 or 8 years, which means you pay significantly more in total interest and could be “upside down” (owe more than the car is worth) for a long time.
This 4-in-1 calculator gives you the power. You can:
1. Solve for (M) to see what the payment *should* be.
2. Solve for (P) to see what car price you can afford based on a payment you’re comfortable with.
3. Solve for (R) to check if the dealer’s financing offer is honest.
4. Solve for (T) to see how much faster you could pay off the car with extra payments.
How to Calculate an Auto Loan (Example)
-
Identify Loan Variables
You want to finance a car after your down payment:
• Loan Amount (P): $35,000
• Annual Rate (R): 7.5% (from your credit union)
• Loan Term (T): 5 years -
Convert to Monthly Terms (i, n)
The formula uses monthly values:
• Monthly Rate (i): 7.5% / 12 / 100 = 0.00625
• Number of Months (n): 5 years * 12 = 60 -
Choose the Payment Formula
Use the standard formula to solve for Monthly Payment (M):
M = P * [ i(1 + i)^n ] / [ (1 + i)^n – 1 ] -
Calculate the Monthly Payment
Plug in the monthly values:
• Numerator: 0.00625 * (1 + 0.00625)^60 = 0.00908
• Denominator: (1 + 0.00625)^60 – 1 = 0.4530
M = $35,000 * [ 0.00908 / 0.4530 ]
M = $35,000 * 0.02004 = $701.40
Your monthly payment will be $701.40.
Frequently Asked Questions (FAQ)
What is a good auto loan term (T)?
While 6 or 7-year terms (72 or 84 months) are common, they are risky. Cars depreciate quickly. A shorter term, like 4 or 5 years (48 or 60 months), ensures you build equity faster and pay less total interest. Try solving for (M) with T=5 and then T=7 to see the huge difference in total interest paid.
What Loan Amount (P) should I use?
The Loan Amount (P) should be the “out-the-door” price (vehicle price + sales tax + documentation fees) *minus* your cash down payment or trade-in value. Don’t just enter the sticker price of the car.
How can I find what car price I can afford?
Decide on a Monthly Payment (M) you are comfortable with (e.g., $600). Get pre-approved for an Annual Rate (R) from your bank (e.g., 7.0%). Choose a smart Loan Term (T) (e.g., 5 years). The calculator will solve for the Loan Amount (P). This is your maximum budget.
Does this calculator work for new and used cars?
Yes. The amortization formula is the same for both. However, be aware that lenders typically charge a higher interest rate (R) for used cars than for new cars, so you will need to adjust your (R) input accordingly.