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How is a car loan calculated?

A woman calculates her car loan.
November 30, 2018

By Kathryn Pins

When you walk into a dealer, you may be thinking about your future car’s model, color, interior and all those cool new features. You’ve done your research on the best cars for your money and how to get the best car deal. But how much time have you spent on car loan rates? It certainly isn’t the most fun aspect of the car buying journey, but it is one of the most important. A great car loan rate could mean hundreds of dollars in savings, which could mean more road trips in your new ride. So, how can you ensure that you are getting a great car loan? How is a car loan calculated? Let’s dive in!

What goes into a car loan calculation?

1. The amount you are borrowing: It’s important to not borrow more money than you need. Put as much as you can towards the down payment of your new car. It’s recommended to put at least 15 percent down so you’re in a good place financially.

2. The length of your loan: A longer loan term will decrease your monthly payments, however, it will cost more in the long run with the added interest. The key is to play around with a car loan calculator to determine which monthly payment would be right for you.

3. Your interest rate: When shopping for a car loan, you want to focus your attention on the annual percentage rate (APR), also known as your interest rate. Your credit score and the lender you choose will impact the interest rate.

Get your car loan calculated online

Use our online car loan calculator to see how much you could pay monthly and over the entire term of your loan. You can adjust your loan amount, term and car type to see how much you could save. The calculation will show your potential monthly payments, the total amount paid on your car, total interest, your rate, and how much you would save compared to the national bank average.

It’s important to get preapproved for a car loan because it is a great negotiation tool. So, after you do the calculation, make it official. Fill out an application to see which rates you qualify for before you go to the dealer.


Kathryn Pins is a marketing content specialist at Alliant. She’s passionate about finding and communicating meaningful financial information with Money Mentor readers. Kathryn is a saver who gets more excited about certificates and her Roth IRA than shopping. When she does spend her earnings, it’s on furthering her education, travel, unique experiences, and loved ones.