Calculate Car Loan Repayment: Payment and Interest

Calculate a car loan’s monthly repayment by entering the amount borrowed, annual percentage rate (APR), and loan term. The calculator estimates the fixed monthly payment and total interest, assuming the rate and payment remain unchanged.

Formula

For a fixed-rate loan with equal monthly payments, the payment is calculated using the standard amortizing-loan formula:

Monthly payment = P × r ÷ [1 − (1 + r)⁻ⁿ]

• P is the amount financed, in dollars.
• r is the monthly interest rate as a decimal: APR ÷ 1,200. For an 8% APR, r = 8 ÷ 1,200.
• n is the number of monthly payments: loan term in years × 12.

The calculator rounds the monthly payment to the nearest cent. It then estimates total interest as monthly payment × number of payments − amount borrowed. Because the total uses the rounded payment, it can differ slightly from a lender’s figure if the lender handles rounding or the final payment differently. The calculator accepts APR values from 0.01% to 100% and terms from 0.0833 to 50 years.

Worked Example

Using the calculator’s defaults—$20,000 financed, 8% APR, and a five-year term:

1. Convert the APR to a monthly decimal rate: 8 ÷ 1,200 = 0.0066667.
2. Find the number of payments: 5 × 12 = 60.
3. Apply the payment formula: $20,000 × 0.0066667 ÷ [1 − (1.0066667)⁻⁶⁰] ≈ $405.53 per month, rounded to the cent.
4. Calculate estimated total interest using that rounded payment: $405.53 × 60 − $20,000 = $4,331.80.

The estimated total paid toward principal and interest is $24,331.80. This does not include any costs outside the financed balance and interest calculation.

Assumptions

• The interest rate is fixed for the full term.
• Payments are made monthly, at the end of each payment period.
• Interest is calculated monthly using APR divided by 12; the APR is entered as a percentage per year.
• Fees, taxes, insurance, optional products, and other charges are not included unless they are already part of the amount borrowed.

What the Repayment Figure Means

The monthly payment is the scheduled amount needed to repay principal and interest over the stated term under the formula’s assumptions. Early payments generally contain a larger interest portion because interest is being calculated on a larger outstanding balance. As the balance falls, more of each level payment goes toward principal. The payment remains level in this model, but its split between interest and principal changes over time.

Total interest is an estimate of the interest paid across all scheduled payments. It is not the total cost of owning a car: purchase price, running costs, and charges not included in the loan calculation are separate. If an upfront down payment reduces the amount borrowed, enter the resulting financed amount rather than the vehicle’s full price. A trade-in or other credit affects the result only if it changes that amount financed.

What Can Change a Car Loan Payment?

• Amount financed: A larger principal generally produces a larger payment when rate and term are held constant. Include only the amount actually financed.
• APR: A higher entered APR increases the calculated payment and, in many cases, total interest. Use the rate in the lender’s loan disclosure; do not assume a quoted rate applies to your final terms.
• Term: A longer term spreads repayment across more months and can lower the scheduled monthly payment, while increasing the time interest accrues. Compare both the payment and total interest rather than looking at the payment alone.
• Fees and add-ons: If charges are financed, they increase the principal. If paid separately, they are not reflected here. Check the actual contract figures to understand which costs are included.

For a simple illustration of term effects, keep the same principal and APR and change only the number of years in the calculator. That isolates the mathematical effect of repayment length; it does not establish what rate, fees, or loan terms a lender will offer.

Common Calculation Mistakes and Limits

A frequent error is entering 8 for an 8% APR in a formula that expects a decimal rate of 0.08. This calculator expects the percentage number, such as 8, and converts it to a monthly decimal internally. Another common mix-up is entering the vehicle’s sticker price instead of the amount financed after any down payment, trade-in credit, or financed charges.

This calculation models a conventional fixed-rate loan with equal monthly payments. It does not model variable rates, irregular payment dates, deferred payments, balloon or residual balances, prepayment penalties, or lender-specific fee treatment. A lender may use different accrual conventions or rounding rules. The APR is an input, not a guarantee that all borrowing costs are captured in the payment formula; review the lender’s itemized figures.

Also distinguish the monthly payment from total interest. A payment is a periodic amount; total interest is the estimated interest over the whole scheduled term. Neither figure alone describes every cost or the timing of charges. The result is an estimate, and the lender’s disclosure gives the exact figures.

Frequently Asked Questions

How do I calculate a car loan payment by hand?
Convert APR to a monthly decimal by dividing the percentage by 1,200, multiply years by 12 to get the payment count, then use P × r ÷ [1 − (1 + r)⁻ⁿ]. Round the resulting payment to cents.

Does the calculator include a down payment?
No separate down-payment field is included. Subtract any down payment or trade-in credit from the price as applicable, account for any financed charges, and enter the resulting amount borrowed.

Why does a longer car loan often have a lower monthly payment?
The principal is divided across more scheduled payments. With interest accruing for a longer period, however, the total interest may be higher even when the monthly payment is lower.

Is APR the same as the monthly interest rate?
No. APR is entered as a yearly percentage. This formula converts it to a monthly rate by dividing by 12 and by 100, or APR ÷ 1,200. The lender’s disclosure is the source for the applicable rate and terms.

Why might my lender’s payment differ from this estimate?
The lender may use different rounding, payment timing, fees, financed add-ons, or interest calculations. Compare the amount financed, APR, term, and payment schedule shown in the disclosure with the calculator inputs.

Related

• Car Loan Calculator With Down Payment: Monthly Car Payment
• Auto Loan Calculator With Trade-In and Amount Owed (Negative Equity)

in p | Loan amount | $ | 20000 | 1 | 100000000
in apr | Interest rate (APR) | % | 8 | 0.01 | 100
in yrs | Loan term | years | 5 | 0.0833 | 50
out pmt | Monthly payment | $ | round(p * (apr / 1200) / (1 - (1 + apr / 1200) ^ -(yrs * 12)), 2) | 2
out int | Total interest | $ | pmt * yrs * 12 - p | 2