Estimate your monthly car payment, total interest, and see a full cost breakdown.
Auto loan payments use the standard amortization formula. The loan amount is the vehicle price plus sales tax, minus your down payment and trade-in value. Your monthly payment depends on three factors: the loan amount, the interest rate, and the length of the loan term.
Financial advisors widely recommend the 20/4/10 rule for car buying: put at least 20% down, finance for no more than 4 years (48 months), and keep total transportation costs (payment + insurance + fuel + maintenance) under 10% of your gross monthly income. This prevents you from becoming "car poor."
Longer terms mean lower monthly payments but dramatically more interest. On a $30,000 loan at 6.5%: a 48-month term costs $4,895 in total interest. A 60-month term costs $6,172 (26% more). A 72-month term costs $7,514 (54% more). An 84-month term costs $8,918 (82% more). That is over $4,000 extra for the "convenience" of lower monthly payments.
New cars depreciate approximately 20% in the first year and about 15% per year for the next four years. If your loan balance exceeds the car's value, you are "upside down" or have negative equity. This is especially risky with small down payments and long loan terms. A 20% down payment and a term under 60 months usually keeps you above water.