Learn how auto loan interest is calculated and how APR, loan amount and repayment term affect total interest.

How Much Interest Will I Pay on My Car Loan?

The total interest on an auto loan depends primarily on the amount financed, APR and repayment term.

A lower monthly payment does not necessarily mean a lower total financing cost.

What Is Auto Loan Interest?

Interest is the cost charged by the lender for providing the borrowed money.

For a standard amortizing loan, each payment generally contains both principal and interest.

For a typical monthly amortization calculation, the annual percentage rate is converted to a monthly rate.

The monthly rate is approximately:

APR ÷ 12

The interest portion of a payment is then based on the outstanding principal according to the loan's terms.

At the beginning of an amortizing loan, the outstanding balance is at its highest point.

As principal is repaid, the balance decreases and the interest portion generally decreases as well.

Suppose two buyers finance the same amount for the same term, but one receives a lower APR.

The buyer with the lower APR will generally pay less interest if all other loan terms are equal.

A longer term can reduce the monthly payment, but the balance remains outstanding for a longer period.

As a result, total interest can be substantially higher.

Consider a hypothetical $30,000 auto loan.

Changing the APR or repayment term while keeping the other assumptions unchanged will change both the monthly payment and total interest.

The exact result depends on the loan terms.

Our car loan calculator calculates an estimated monthly payment, total payments and total interest based on the information you enter.

A lower monthly payment can result from a longer loan term rather than a lower interest rate.

Always compare the total amount paid over the life of the loan.

APR, amount financed and loan term all influence how much interest you pay.

Before accepting financing, compare the complete loan terms and calculate the total financing cost.