Auto Loan Calculator Formula & How It Works
M = P × [r(1+r)ⁿ] / [(1+r)ⁿ − 1] | Total Car Cost = Down + (M × n) + Insurance × n months
- P = Vehicle price − trade-in value − down payment
- Auto loan terms: typically 24–84 months
- Standard rates: 4–15% depending on credit
- 0% dealer financing: only for top-tier credit buyers
Auto loan payments use the same amortization formula as mortgages. Longer loan terms (72–84 months) lower the monthly payment but dramatically increase total interest and risk 'being underwater' (owing more than the car is worth). Compare total cost, not just monthly payment, when choosing between offers.