Car Loan Calculator

What Is a Car Loan and How Does It Work?
A car loan is a type of financing that lets you borrow the money needed to purchase or lease a new or used vehicle. Loan terms typically range from three to five years, though you can often choose a shorter or longer repayment period to fit your budget. For people with steady income, car loans offer the convenience of driving off the lot today instead of waiting until they’ve saved the full purchase price.

Down Payment vs. Monthly Payments

• Down Payment: A lump-sum amount you pay upfront when you buy the car.
• Monthly Payments: Regular, fixed installments you make over the life of the loan until the balance is paid in full.

Putting more money down reduces the loan amount, which in turn lowers your monthly payments. Before signing on, calculate both your down payment and your total monthly outlay—taking into account the interest rate and potential tax deductions—to ensure the loan fits comfortably within your budget.

Interest Rates on a Car Loan
Interest is the fee you pay for borrowing, expressed as an Annual Percentage Rate (APR). There are two main APR structures:

• Fixed APR: Stays the same throughout the loan term, making it easy to budget.
• Variable APR: Can rise or fall with market rates, which means your payments might change over time.

Typical car loan APRs range from about 3% to 8%, depending on your credit profile, down payment size, and whether you choose fixed or variable interest.

By understanding these core elements—loan term, down payment versus monthly payment, and APR—you can make a confident, informed decision when financing your next vehicle.