Car Loan Calculator
Car finance goes wrong in a specific way: the vehicle depreciates faster than the loan amortises. This calculator gives you the instalment and total interest for a given price, down payment and term so you can see whether a 72-month deal leaves you underwater for years.
Inputs
Result
485.49 / month
Total paid 29,129.14 on a 24,000 loan
How the car loan calculator works
The instalment uses the same amortisation formula as any fixed loan: Payment = P × r × (1 + r)^n ÷ ((1 + r)^n − 1), with P as price minus down payment and trade-in.
Depreciation runs on a separate track. A typical new car loses 20% in year one and roughly 15% a year after, so compare the balance owed against the resale value, not against the sticker price.
Negative equity happens whenever the outstanding balance exceeds market value. Longer terms and small down payments both widen that gap.
Worked example: 30,000 car, 3,000 down, 7.9% over 72 months
- Financed amount: 27,000. r = 7.9 ÷ 1,200 = 0.0065833, n = 72.
- Payment ≈ 471 per month; total repayment ≈ 33,900, so interest is about 6,900.
- After two years you have paid roughly 11,300 and still owe about 19,300.
- The car is worth roughly 20,400 by then — barely 1,100 of equity after two years of payments.
Common mistakes to avoid
Shopping by monthly payment
Dealers can hit almost any monthly target by extending the term. A 96-month loan feels affordable and can leave you owing more than the car is worth halfway through.
Rolling negative equity into the new loan
Adding an old balance to a new purchase means financing a car you no longer own, at a rate applied to the combined total.
Leaving out registration, tax and insurance
On-road cost typically runs 8–12% above the quoted price, and it is usually financed too if you do not pay it separately.
Frequently asked questions
Is a 72-month car loan a bad idea?
It is not automatically wrong, but it extends the window where you owe more than the vehicle is worth. A larger down payment shortens that window more effectively than a lower rate.
How much should I put down on a car?
Around 20% keeps you close to break-even against first-year depreciation. Below 10%, negative equity for the first two to three years is likely.
Should I take dealer finance or a bank loan?
Compare APR, not rate. Subsidised manufacturer rates can genuinely beat banks, but often only when you forgo a cash rebate — price the rebate into the comparison.
Does leasing work out cheaper than buying?
Monthly cost is usually lower because you only pay for the depreciation you use, but you own nothing at the end. The lease payment calculator makes that trade explicit.
Can I pay off a car loan early?
Usually yes, and it is straightforward on reducing-balance contracts. Watch for precomputed-interest agreements, where early settlement saves far less than you would expect.
Learn more
The Car Loan Trap: When Your Loan Outlasts Your Car's Value
Long terms make cars feel affordable and quietly leave buyers owing more than the vehicle is worth. Here's the arithmetic behind negative equity.
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