Vehicle loan calculator

How lenders treat different vehicles

Lenders set terms by the vehicle. New cars get the longest terms and best rates. Used vehicles get shorter terms and higher rates, and many lenders cap the age or mileage they will finance. Trucks, SUVs and larger vehicles are priced like cars but cost more to buy, and motorcycles, RVs and boats usually have their own loan products with different terms.

For those, use the dedicated calculators: the truck loan calculator, the motorcycle loan calculator and the RV loan calculator.

Check the age and mileage rules

Before you fall for an older vehicle, ask the lender about its limits. Some will not finance a car over ten years old or past 100,000 miles, or will charge more. Private-party purchases usually need a loan from your bank or credit union rather than a dealer.

$23,490 financed: payment by loan length

At 7.6% APR, financing $23,490 (the $24,000 price plus 6% sales tax and $450 in fees minus $2,400 down) costs $471.81 a month over 60 months and $361.46 over 84 months. The longer loan lowers the payment by $110.35 but adds $2,054 in interest. Going the other way, 36 months raises the payment to $731.76 and cuts total interest to $2,854.

How the interest rate changes a 5-year loan

On the same $23,490 over 5 years, each full percentage point of APR moves the payment by about $11.26 and total interest by about $675. 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 $24,000 car at 7.6% over 5 years with different down payments.

Paying extra

Adding $100 a month to this loan would pay it off 12 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 $24,000 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, $471.81 a month points to a gross income of roughly $56,600 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 $24,000 car, you would likely owe more than the car is worth until about year 2. Gap insurance can cover the difference if the car is totaled while you are underwater.