Car loan amortization calculator

How a car loan amortizes

Interest each month is the remaining balance times the monthly rate, so early payments are mostly interest and later ones mostly principal. On a 60-month loan the split flips gradually, which is why paying extra in the first year saves more than paying extra in the last.

Scroll the schedule to find when you reach 50% paid off, and use the balance column to see what you would owe if you sold or traded the car at any point.

Simple interest vs precomputed interest

Most car loans are simple-interest loans: interest accrues daily on the remaining principal, so paying early or extra reduces the interest you owe. Some loans are precomputed, with interest calculated up front. Federal rules ban the Rule of 78 method on consumer loans longer than 61 months, but check your contract to see how interest is charged and whether early payoff costs anything.

$25,200 financed: payment by loan length

At 7.5% APR, financing $25,200 costs $504.96 a month over 60 months and $386.52 over 84 months. The longer loan lowers the payment by $118.44 but adds $2,171 in interest. Going the other way, 36 months raises the payment to $783.88 and cuts total interest to $3,020.

How the interest rate changes a 5-year loan

On the same $25,200 over 5 years, each full percentage point of APR moves the payment by about $12.06 and total interest by about $724. Rates depend on your credit score, the loan term and whether the car is new or used, so get a pre-approval from a bank or credit union before you walk into a dealership.

What a bigger down payment does

A down payment reduces what you finance, which cuts both the payment and the interest, and it protects you from owing more than the car is worth early in the loan, when new cars depreciate fastest. Here is the same $28,000 car at 7.5% over 5 years with different down payments.

Paying extra

Adding $100 a month to this loan would pay it off 11 months sooner and save $1,015 in interest, as long as your lender applies extra money to principal and charges no prepayment penalty. Ask before you start.

Can you afford a $28,000 car?

A common rule of thumb, the 20/4/10 guideline, suggests 20% down, a term of at most 4 years and total car costs under 10% of gross income. On payment alone, $504.96 a month points to a gross income of roughly $60,600 a year to stay at 10%, before insurance, fuel and maintenance. This loan departs from the guideline because the down payment is 10% rather than 20% and the term of 60 months is longer than 48, so the payment is lower than a stricter plan would give but the loan costs more overall.

Will you owe more than the car is worth?

New cars commonly lose around 20% of their value in the first year and roughly 15% a year after that, though this varies by model. Using that rough rule on a $28,000 car, the car stays worth more than the loan from the end of the first year. Gap insurance can cover the difference if the car is totaled while you are underwater.