1. What is Car Loan Interest?

The total interest on a car loan represents the extra amount you pay beyond the principal (original loan amount) for the privilege of borrowing money. It's determined by the loan amount, interest rate, and loan term.

2. How Does the Calculator Work?

The calculator uses the simple interest formula:

Where:

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

Explanation: This calculation shows the total cost of borrowing by multiplying the number of payments by the payment amount, then subtracting the original loan amount.

3. Importance of Interest Calculation

Details: Understanding total interest helps borrowers compare loan offers, budget for total vehicle cost, 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: Does this include all loan costs?
A: This calculates only the interest portion. Additional fees (origination, documentation) may apply but aren't included here.

Q2: How can I reduce total interest paid?
A: Make larger down payments, choose shorter loan terms, or negotiate lower interest rates to reduce total interest.

Q3: Why is my actual interest different?
A: This is a simplified calculation. Actual loans may use daily compounding or have variable rates.

Q4: Should I focus on monthly payment or total interest?
A: Consider both - a lower payment might mean paying more interest over time due to a longer term.

Q5: How does refinancing affect total interest?
A: Refinancing at a lower rate can reduce total interest, but extending the loan term might increase it.