1. What is the Total Interest Formula?

The Total Interest formula calculates how much interest you'll pay over the life of an auto loan. It's based on Bankrate's auto loan rates and shows the true cost of borrowing.

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 Total Interest Calculation

Details: Knowing the total interest helps compare loan offers and understand the true cost of financing a vehicle. Even small rate differences can significantly impact total interest paid.

4. Using the Calculator

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

5. Frequently Asked Questions (FAQ)

Q1: Why use Bankrate's rates for this calculation?
A: Bankrate provides current, competitive auto loan rates that reflect real market conditions.

Q2: Does this include all loan costs?
A: This calculates interest only. Additional fees (origination, documentation) may apply but aren't included here.

Q3: How can I reduce total interest paid?
A: Options include shorter loan terms, larger down payments, or securing a lower interest rate.

Q4: Why is my actual interest different?
A: This assumes fixed-rate loans. Variable rates or payment changes will affect actual interest.

Q5: Should I focus more on monthly payment or total interest?
A: While monthly payments affect your budget, total interest shows the real cost - consider both when choosing a loan.