Calculate a New Car Loan Payment

Calculate a new car loan’s estimated monthly payment by entering the amount financed, APR, and loan term. The calculator also estimates total interest using a fixed-rate loan with equal monthly payments; its figures do not include taxes, fees, insurance, or other costs unless they are included in the amount financed.

Formula

The monthly payment is the amount that pays down principal and covers interest over the stated term, assuming the interest rate stays fixed and payments are made monthly. The formula is:

Payment = P × r / [1 − (1 + r)⁻ⁿ]

• P = amount financed, in dollars.
• r = monthly interest rate as a decimal, calculated as APR ÷ 1200. For an 8% APR, r = 8 ÷ 1200.
• n = number of monthly payments, calculated as loan term in years × 12.

The calculator rounds the payment to cents. Total interest is calculated as the rounded monthly payment × number of payments − amount financed. This makes the displayed total follow the displayed payment, though the final payment on a real loan can differ slightly because lenders apply their own rounding and payment schedules.

Worked Example

Using the calculator’s default values—$20,000 financed, 8% APR, and 5 years—the monthly rate is 8 ÷ 1200 = 0.0066667, and the number of payments is 5 × 12 = 60.

1. Substitute the values: $20,000 × 0.0066667 ÷ [1 − (1 + 0.0066667)⁻⁶⁰].
2. The calculated monthly payment rounds to $405.53.
3. Total paid using the rounded payment is $405.53 × 60 = $24,331.80.
4. Estimated interest is $24,331.80 − $20,000 = $4,331.80.

Assumptions

• The APR and payment amount stay fixed throughout the term.
• Payments are level monthly payments, with the first payment one month after the loan begins.
• Interest accrues monthly at APR ÷ 12; the APR input is entered as a percentage, such as 8 for 8%.
• The estimate excludes fees, taxes, insurance, and other charges unless they are part of the amount financed. It does not model a down payment, trade-in, rebates, or a separate final payment.

What Amount Should You Enter?

Use the amount financed, not necessarily the car’s advertised price or sticker price. The amount financed is the principal used for the loan calculation after applicable cash down, trade-in credit, and other price adjustments, and after any charges or optional products included in financing. These details vary by transaction, so use the amount shown in the lender’s written figures when available.

For example, if a vehicle’s negotiated price is $30,000 and a buyer pays $5,000 toward it upfront, the financed amount is not automatically $25,000: taxes, fees, a trade-in balance, or financed add-ons may change it. The calculator does not determine those amounts. Enter a lender-provided principal or calculate an estimate from the complete transaction figures.

How to Read the Estimate

The monthly payment is a scheduled principal-and-interest estimate, not the full cost of owning or operating a car. A separate insurance bill, fuel, maintenance, registration, and other expenses are not represented. Nor does the monthly payment establish whether a lender will approve an application or what terms will be offered.

Total interest is the estimated interest paid across the full term if every scheduled payment is made as modeled. It is not the total amount paid: add the principal to interest to find the modeled total of payments. A longer term generally spreads repayment over more months and changes both payment size and total interest; the calculator lets you see how the inputs affect the arithmetic without predicting lender terms.

Factors That Change the Payment

• Amount financed: A larger principal raises the payment and, all else equal, the total interest.
• APR: A higher entered APR raises the payment and interest for the same principal and term. Use the APR supplied for the specific loan estimate, not an assumed market rate.
• Term: More monthly payments generally reduce the amount due each month, but interest accrues over more time. Compare both payment and total interest rather than relying on the monthly figure alone.
• Upfront cash or trade-in: These may reduce the amount financed, but an existing amount owed on a trade-in or other transaction details can change the result.

To compare two estimates consistently, hold two inputs constant while changing the third. Make sure both calculations use the same principal definition and APR basis; comparing only monthly payments can hide differences in term or included costs.

Common Calculation Limits

This standard installment-loan formula assumes equal payments and a fixed periodic rate. It does not reproduce every lender’s day-count method, payment date, fees, or contract-specific rounding. If the interest rate can change, the payment schedule can change too; this fixed-rate estimate cannot forecast those changes.

A common mistake is entering 0.08 for an 8% APR. The calculator expects a percentage value, so enter 8; it converts that to a monthly decimal rate by dividing by 1200. Another is entering the vehicle price while overlooking the actual financed principal. For a real offer, check the lender’s disclosure for the amount financed, APR, term, scheduled payment, and any amounts not represented here.

Frequently Asked Questions

How do I calculate a car loan payment by hand?
Convert APR to a monthly decimal rate by dividing the percentage by 1200, and convert years to months by multiplying by 12. Substitute the principal, monthly rate, and payment count into the fixed-payment formula above, then round the result to cents.

Does the calculator include a down payment?
No. A down payment is not a separate input. Account for it when determining the amount financed, then enter that principal. The calculator also does not determine trade-in value, taxes, or fees.

Does APR mean the same thing as the interest rate?
Not necessarily. APR is a disclosed annual percentage measure that may reflect certain loan costs under the applicable calculation method, while the contract’s interest rate is used to accrue interest. This calculator uses the entered APR as the annual rate for its monthly-payment formula, so its estimate may differ from a lender’s schedule if APR and the contract rate differ.

Why does a longer car loan have a lower monthly payment?
It divides repayment across more monthly installments. Because the balance remains outstanding for longer, total interest can be higher even when each payment is lower, assuming the same principal and rate.

Is the calculated payment the full monthly cost of a new car?
No. It estimates loan principal and interest only. Insurance and other ownership costs are separate, and any financed charges are reflected only if included in the amount entered.

This result is an estimate; the lender’s disclosure gives the exact figures.

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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 | $ | p * (apr / 1200) / (1 - (1 + apr / 1200) ^ -(yrs * 12)) | 2
out int | Total interest | $ | pmt * yrs * 12 - p | 2