Car payment calculator with down payment

How much down payment is enough

A common guideline is 20% down on a new car and 10% on a used one. The down payment matters twice: it reduces the amount financed, so you pay less interest, and it creates instant equity, which protects you if the car is totaled or you want to sell early.

The down-payment table below compares 0%, 10% and 20% on the same car, rate and term so you can see the monthly and total-interest difference side by side.

Where the down payment should come from

Use savings you can spare while keeping an emergency fund. A trade-in counts as part of the down payment. Avoid draining your cash cushion for a larger down payment if it forces you onto a credit card later, since card interest is far higher than car-loan interest.

$30,600 financed: payment by loan length

At 7% APR, financing $30,600 (the $35,000 price plus 6% sales tax and $500 in fees minus $7,000 down) costs $605.92 a month over 60 months and $461.84 over 84 months. The longer loan lowers the payment by $144.08 but adds $2,439 in interest. Going the other way, 36 months raises the payment to $944.84 and cuts total interest to $3,414.

How the interest rate changes a 5-year loan

On the same $30,600 over 5 years, each full percentage point of APR moves the payment by about $14.54 and total interest by about $872. 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 $35,000 car at 7% over 5 years with different down payments.

Paying extra

Adding $100 a month to this loan would pay it off 9 months sooner and save $976 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 $35,000 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, $605.92 a month points to a gross income of roughly $72,700 a year to stay at 10%, before insurance, fuel and maintenance. Here the term of 60 months is longer than 48, which means a smaller monthly payment in exchange for more interest and a longer period of debt.

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 $35,000 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.