Auto Loan Basics: APR, Term and Total Cost
How a car loan payment is calculated, how APR and loan term affect what you pay, and why a longer term lowers the payment but costs more overall.
How the payment is set
An auto loan is a fixed-rate installment loan. The monthly payment depends on the amount financed, the APR, and the term in months (commonly 36 to 72).
Longer term, higher cost
A longer term lowers the monthly payment but increases total interest. Stretching a loan to 72 or 84 months can also leave you owing more than the car is worth.
What raises your APR
Credit score, new vs. used, and the lender all affect the APR. Getting pre-approved and comparing offers can meaningfully lower the rate.
FAQ
Should I make a down payment?
A larger down payment reduces the amount financed, lowering both the payment and total interest, and reduces the risk of being underwater.
Does the loan include taxes and fees?
The payment shown is principal and interest only. Sales tax, title and registration are usually separate or added to the amount financed.
Related calculators
Last updated: 2026-07-25 · This content is a 2026 reference and may differ from actual rules and rates.