What is an auto loan?
An auto loan lets you spread the cost of a car over time. You borrow a principal (vehicle price minus your down payment and any trade‑in) and repay with interest.
Payment formula (with example)
Monthly payment M = P × r / (1 − (1 + r)^(−n)), where r = APR/12 and n = term in months.
Example: $27,000 financed at 6.5% for 60 months → about $529/mo.
What changes your payment?
- APR: every 1% often moves the payment more than people expect.
- Term: shorter terms raise the payment but reduce total interest.
- Down payment: lowers the principal, which lowers interest paid.
Tips to save
- Get pre‑approved at a credit union, then negotiate at the dealer.
- Keep extras in check (add‑ons, warranties). They increase the principal.
- Avoid rolling old negative equity into the new loan.
Use the calculator
Try different down payments, APRs, and terms with the Auto Loan Calculator to see payments instantly.