This calculator estimates the total interest paid on a fixed-rate car loan from the amount borrowed, APR, and term. Enter those three values to see the monthly payment and total interest over the scheduled repayment period.
Formula
Total interest is the sum of the scheduled monthly payments minus the amount borrowed. The calculator first estimates the level monthly payment using the standard amortizing-loan formula:
Monthly payment = P × r ÷ [1 − (1 + r)−n]
Total interest = monthly payment × n − P
- P is the loan principal, in dollars.
- APR is the annual percentage rate entered as a percentage per year.
- r is the monthly rate, calculated as APR ÷ 1,200.
- n is the number of monthly payments, calculated as loan term in years × 12.
- Monthly payment is rounded to the nearest cent before the total interest is calculated.
The formula assumes equal monthly payments and a fixed rate. Because the rate is expressed as a percentage, an APR of 8 is divided by 1,200 to get the monthly decimal rate used in the calculation.
Worked Example
Using the calculator’s default values—$20,000 borrowed, 8% APR, and a five-year term:
- Convert the APR to a monthly rate: 8 ÷ 1,200 = 0.0066667.
- Find the number of payments: 5 × 12 = 60.
- Calculate the payment: $20,000 × 0.0066667 ÷ [1 − (1.0066667)−60] = approximately $405.53 per month, rounded to cents.
- Calculate total payments using that rounded payment: $405.53 × 60 = $24,331.80.
- Subtract the amount borrowed: $24,331.80 − $20,000 = $4,331.80 in total interest.
The calculator’s outputs are therefore a monthly payment of $405.53 and total interest of $4,331.80. Actual payment schedules may differ slightly if a lender calculates interest daily, rounds at different stages, or sets a final payment that differs by a few cents.
Assumptions
- The APR is fixed for the entire loan term.
- Payments are equal, made monthly, and begin on schedule; the calculation does not model a delayed first payment.
- Interest is calculated using monthly periods at APR ÷ 12.
- Fees, taxes, insurance, optional products, down payments, trade-in value, and other charges are not included unless they are already reflected in the loan amount or APR.
What the Total Interest Figure Means
Total interest is the borrowing cost represented by interest over the modeled repayment schedule. It is separate from principal: principal is the amount financed, while interest is the additional amount calculated for borrowing it. In the example, the scheduled payments add up to $24,331.80, consisting of $20,000 in principal and $4,331.80 in interest.
This figure is not necessarily the full cost of owning or financing a car. The amount paid at purchase may also include taxes, registration, dealer or lender charges, and optional coverage. Those costs are not automatically interest. If an eligible fee or product is financed, it can increase the principal, and interest may then accrue on that larger balance. The loan agreement and itemized disclosures show which charges are included.
How Term and APR Affect Interest
The term and APR both shape the result. Holding the amount and rate constant, a longer term generally means more payments and more time for interest to accrue, even though the monthly payment is generally lower. A shorter term generally means larger monthly payments but fewer months of scheduled interest. The calculator shows total scheduled interest, not just the payment that may feel most noticeable month to month.
A higher APR increases the monthly interest rate used in the formula and usually increases both the payment and total interest for the same principal and term. To understand how much each input matters, change one value at a time while holding the others constant. Use the APR and term shown in the actual loan disclosure for an estimate; do not treat the example’s 8% as a market quote or a prediction.
Common Questions About the Calculation
Is total interest the same as total amount paid? No. Total amount paid includes repayment of principal as well as interest. In this calculator, total scheduled payments equal the original principal plus the calculated interest, subject to cent rounding.
Does a down payment reduce the interest? A down payment can reduce the amount financed if it lowers the loan principal. Since interest is calculated on the modeled principal, enter the amount actually borrowed—not the vehicle’s sticker price—when you know it. A trade-in or other credit may also affect the amount financed, but the calculator does not value those items.
Does the APR include every cost? This calculator uses APR as the rate input, but it does not separately itemize charges or determine which costs a particular disclosure includes. Check the lender’s loan documents for the exact amount financed, payment schedule, and total of payments. Do not add a fee twice if it is already reflected in the figures you enter.
Why might my lender’s figure differ? The estimate assumes a fixed rate, monthly periods, equal payments, and a payment rounded to cents. A lender’s schedule can differ because of payment dates, daily-interest conventions, fees, rounding methods, or a final adjusted payment. Use the disclosed schedule for the contractual figures.
Does paying early change this estimate? The calculation assumes all scheduled payments are made as planned. Extra principal payments or early payoff can change the interest ultimately paid, but this calculator does not model them. The effect depends on when payments are applied and the loan’s actual payoff calculation; consult the disclosure or servicer for those figures.
Frequently Asked Questions
How do I calculate total interest on a car loan?
Multiply the monthly payment by the number of monthly payments, then subtract the amount borrowed. For an estimate, first calculate the fixed monthly payment from principal, monthly rate, and term.
How much interest will I pay on a $20,000 car loan?
It depends on the APR and term. With the calculator’s example inputs of 8% APR for five years, the estimated total interest is $4,331.80 after rounding the monthly payment to $405.53.
Does a longer car loan always cost more in interest?
For the same principal and fixed APR, extending the term generally increases total scheduled interest because repayment takes longer. The calculator can illustrate the effect, but it does not account for changes in rate or fees.
Is the car loan APR the same as the monthly interest rate?
No. This formula converts APR to a monthly rate by dividing the percentage by 1,200. For example, 8% APR becomes 0.0066667 as a monthly decimal rate.
Can I use this for a variable-rate auto loan?
Not for a reliable full-term estimate if the rate can change. The calculation assumes one fixed APR throughout the loan; a changing rate requires recalculating future payments and interest as the rate changes.
This result is an estimate; the lender’s disclosure gives the exact figures.
Related
Formula used
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
Each line is one input (in, sel, list) or one result (out: label, unit, formula, decimals). How the calculators work
Method: the standard loan formula for this calculation, fixed rate and monthly compounding unless stated, rounded as each result states. Not financial advice; no lender, rate or product is recommended. See formulas and assumptions, the disclaimer or report an error.
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