Auto Loan Calculator

In 2026, average auto loan rates range from 5–8% APR for new cars with good credit (670+ FICO) and 7–12% for used cars. Buyers with excellent credit (740+) can secure rates of 3–5%. Credit unions typically offer 1–2% lower rates than bank or dealership financing. Always get pre-approved from your credit union or bank before visiting the dealer — it gives you a baseline for negotiation and prevents the dealer from rolling profit into the rate.

The standard recommendation is 20% down on new cars and 10% on used cars. A larger down payment lowers your monthly payment, reduces total interest, and helps prevent being underwater (owing more than the car is worth). New cars lose 15–25% of value in the first year, so putting less than 10% down creates negative equity almost immediately. If 20% is not possible, consider gap insurance to cover the difference if the car is totaled.

Longer terms lower the monthly payment but significantly increase total interest. A $30,000 loan at 7%: 60 months costs $5,940 in interest · 72 months costs $7,147 · 84 months costs $8,587. You also stay underwater on the loan longer as the car depreciates faster than you pay it down. Most financial advisors recommend keeping auto loans at 60 months or less. If you need a 72+ month term to afford the payment, the car is likely outside your budget.

Always get pre-approved from your bank or credit union before visiting the dealer. Dealers can mark up the interest rate (the "dealer reserve") and keep the difference as profit — often 1–2% without telling you. With a pre-approval letter in hand, you can negotiate purely on price and use your financing, or accept dealer financing only if it is genuinely better. 0% or low promotional rates from manufacturers are legitimate and worth taking if your credit qualifies and no other costs are rolled in.

APR (Annual Percentage Rate) is the yearly cost of your loan expressed as a percentage. For auto loans, APR and the interest rate are usually identical, unlike mortgages where APR includes closing costs. The monthly payment is calculated using the amortization formula: payment = principal × [r(1+r)^n / ((1+r)^n − 1)], where r is the monthly rate (APR / 12) and n is the number of months. Even a 1% APR difference on a $30,000 loan over 60 months changes your payment by about $14/month and total interest by $840.

A trade-in reduces the amount you need to finance, lowering both your monthly payment and total interest. In most states, trading in a car also reduces the sales tax you pay on the new vehicle — you only pay tax on the difference between the new car price and the trade-in value. Get your trade-in appraised independently (Carmax, KBB Instant Cash Offer, Carvana) before going to the dealer so you know its true value and can negotiate accordingly.

GAP insurance (Guaranteed Asset Protection) covers the difference between what you owe on your loan and what your car is worth if it is totaled or stolen. It is most useful when you put less than 20% down, finance for 72+ months, or roll negative equity from a previous loan into the new one. Dealers typically charge $500–$1,000 for GAP. Many auto insurers offer it for $20–$40/year added to your policy. Always buy from your insurer rather than the dealer.

Yes, and doing so saves money on interest. Most auto loans have no prepayment penalty. If you make one extra payment per year on a 60-month loan, you pay it off roughly 4–5 months early. Paying $100 extra per month on a $25,000 loan at 6.5% for 60 months saves over $800 in interest and cuts about 9 months from the term. Always confirm the extra payment is applied to principal, not the next month’s payment, by specifying this when making the payment.

Leasing has lower monthly payments and lets you drive a new car every few years, but you build no equity and face mileage limits (typically 10,000–15,000 miles/year). Buying costs more monthly but the car is yours after payoff and total lifetime cost is typically lower if you keep it 7+ years. Leasing makes financial sense if you need a new car every 3 years for business purposes, value warranty coverage, and stay within mileage limits. For most personal buyers who drive a car past the loan payoff, buying and keeping is the better long-term value.

Credit score is the single biggest factor in your auto loan rate. Typical 2026 rate ranges by FICO score: 720+ — 4–6% · 690–719 — 5.5–8% · 660–689 — 7–10% · 620–659 — 10–14% · Below 620 — 14%+ or denial. A 100-point score difference can mean a 4–6% rate difference, costing $3,000–$5,000 more in interest on a typical loan. If your score is below 680, consider waiting 6–12 months to improve it before taking a large auto loan.