1. What is Total Interest on an Auto Loan?

The total interest paid on an auto loan represents the extra amount you pay beyond the principal (original loan amount) over the life of the loan. It's a crucial factor when comparing loan offers.

2. How Does the Calculator Work?

The calculator uses the formula:

Where:

• \( n \) — Number of payment periods (months)
• \( PMT \) — Monthly payment amount
• \( P \) — Principal loan amount

Explanation: The formula calculates the total amount paid over the loan term and subtracts the principal to determine just the interest portion.

3. Importance of Calculating Total Interest

Details: Understanding total interest helps borrowers compare loan options, evaluate the true cost of financing, and make informed decisions about loan terms and down payments.

4. Using the Calculator

Tips: Enter the loan term in months, your monthly payment amount, and the original loan amount. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Why calculate total interest separately?
A: It reveals the true cost of borrowing, which might be obscured by focusing only on monthly payments or interest rates.

Q2: How can I reduce total interest paid?
A: Make a larger down payment, choose a shorter loan term, or secure a lower interest rate.

Q3: Does this include other fees?
A: No, this calculates only interest. Additional fees (origination, documentation, etc.) would increase total cost further.

Q4: How accurate is this calculation?
A: It's accurate for fixed-rate loans where payments don't change. For variable-rate loans, it's an estimate.

Q5: Should I focus more on APR or total interest?
A: Both are important - APR helps compare rates, while total interest shows the actual dollar cost.