Auto Loan Total Cost: Price, APR, Term and Down Payment
See how vehicle price, APR, loan term and down payment combine to determine monthly payment and total borrowing cost.
Monthly payment is not the vehicle price
A manageable monthly payment can be created by extending the loan term, but a longer term can increase total interest and keep you in debt longer. Compare total paid as well as the monthly amount.
Finance the out-the-door amount
Taxes, registration, documentation charges and optional products can increase the amount financed. A calculator is most useful when the loan amount reflects the transaction you expect rather than only the advertised vehicle price.
Down payment changes both risk and cost
A larger down payment generally reduces the amount financed and interest paid. It can also reduce the chance that the loan balance remains above the vehicle value, although depreciation varies.
APR is essential for comparison
Compare financing offers using APR and the same term and amount. Dealer incentives can make the choice between a rebate and promotional financing less obvious, so calculate both scenarios.
Test shorter and longer terms
Run several terms using the same loan amount and APR. The comparison shows the tradeoff between monthly cash flow and total interest, which is harder to see when looking only at a dealer payment quote.
Educational information only. This article is not individualized financial, investment, tax or legal advice and is not a lender, issuer or investment offer. Review current disclosures from the relevant provider before making a decision.