Calculate Your Car Payment with Precision
Understanding your car payment is crucial before signing any auto loan agreement. Our Car Payment Calculator uses the standard amortization formula to show you exactly what you'll pay each month, how much goes to interest vs. principal, and the total cost of your loan over time. With interest rates averaging 6-8% for new cars in 2026, knowing your monthly obligation helps you budget effectively and negotiate better terms.
Quick Comparison: 3-Year vs 5-Year vs 7-Year Loans
Here's how loan term affects your monthly payment and total cost for a $35,000 vehicle with 20% down ($28,000 loan) at 6.5% APR:
| Loan Term | Monthly Payment | Total Interest | Total Paid |
|---|---|---|---|
| 36 months (3 years) | $858 | $2,888 | $30,888 |
| 60 months (5 years) | $548 | $4,880 | $32,880 |
| 72 months (6 years) | $467 | $5,624 | $33,624 |
| 84 months (7 years) | $410 | $6,440 | $34,440 |
Factors That Affect Your Car Payment
Five key variables determine your monthly auto loan payment:
Payment Formula
The monthly payment is calculated using the standard amortization formula. For advanced financial modeling, see our lease vs buy calculator.
How to Get the Best Car Loan Rate in 2026
Interest rates are the most powerful factor in your total cost. In early 2026, new car loan rates average 6.5-7.5% for buyers with good credit. Used car rates are typically 1-2% higher. Here's how to secure the best rate:
Down Payment Strategy: How Much Should You Pay Upfront?
The standard recommendation is 20% down, but the right amount depends on your situation:
| Down Payment | Pros | Cons |
|---|---|---|
| 10% (minimum) | Keep cash for emergencies | Higher monthly payment, may need gap insurance |
| 20% (recommended) | Avoid being underwater, lower payments, better rates | Requires more cash upfront |
| 30-50% | Significantly lower interest, minimal monthly payment | Ties up capital that could be invested |
Loan Term Decision: Short vs Long
The loan term dilemma: Lower monthly payment or less total interest? In 2026, the average new car loan term is 68 months. Here's how to decide:
2026 Car Loan Market Context
The automotive financing landscape in early 2026 shows moderation after the volatility of 2022-2024. Average new car interest rates have stabilized in the 6.5-7.5% range for prime borrowers, down from the 8-9% peaks of 2023. The Federal Reserve's monetary policy has created a more predictable lending environment. New car prices have plateaued around $48,000 average, while used car prices continue gradual normalization. Many manufacturers are offering competitive financing incentives (0-2.9% APR for well-qualified buyers) to stimulate sales. Loan terms continue trending longer, with 72-84 month loans becoming more common despite financial advisors' warnings. Electric vehicle financing often qualifies for preferential rates from some lenders. When comparing financing options, our car loan calculator helps you factor in sales tax and registration fees that can significantly impact your total financing amount.
Should You Refinance Your Car Loan?
If you financed when rates were higher, refinancing can save thousands. Consider refinancing if:
Frequently Asked Questions
Q:What is a good interest rate for a car loan in 2026?
For new cars in early 2026, excellent credit (720+) can secure 5.5-6.5% APR. Good credit (680-719) typically sees 6.5-8%. Fair credit (620-679) ranges from 8-12%, and poor credit can exceed 12-15%. Used car rates are typically 1-2% higher. Credit unions and manufacturer incentives may offer rates as low as 0-2.9% for well-qualified buyers on select models.
Q:How much should I put down on a car?
The standard recommendation is 20% down to avoid being underwater (owing more than the car's worth). Minimum is typically 10%. A larger down payment reduces your monthly payment, total interest paid, and may qualify you for better rates. However, balance this against keeping emergency savings and other financial goals.
Q:Is a 72-month or 84-month car loan a bad idea?
Long loan terms (72-84 months) have significant downsides: you'll pay substantially more interest, stay underwater longer, and may still owe money when the car needs major repairs or you want to upgrade. They're acceptable only if you absolutely cannot afford a 60-month payment, can't reduce the car price, and plan to keep the car long-term. Most financial advisors recommend 60 months maximum.
Q:What credit score do I need to buy a car?
You can get a car loan with credit scores as low as 500-550, but you'll pay very high interest rates (12-20%+). A score of 680+ qualifies for good rates, while 720+ gets you the best rates. If your score is below 620, consider improving it before buying to save thousands in interest, or shop credit unions which may offer better terms for lower scores.
Q:Should I finance through the dealer or my bank?
Get quotes from both, plus credit unions and online lenders. Dealers sometimes offer manufacturer incentives (0-2.9% APR), but may mark up rates for profit. Banks and credit unions often have straightforward rates. Get pre-approved from your bank/credit union before going to the dealer to have leverage in negotiations. Compare all offers focusing on APR, not monthly payment.
Q:How does my trade-in affect my car payment?
Your trade-in value is subtracted from the vehicle price before calculating your loan. For example, a $35,000 car with a $5,000 trade-in means you're financing $30,000 (minus down payment). This directly lowers your monthly payment. Get your trade-in appraised independently (Carmax, Carvana) before dealer negotiations to ensure you're getting fair value.
Q:Can I pay off my car loan early?
Most car loans allow early payoff without penalty, but check your loan agreement. Paying extra toward principal each month can save significant interest and shorten your loan term. Even an extra $50-100/month can save thousands over the loan life. Some lenders charge prepayment penalties - avoid these loans if possible.
Q:What's the difference between APR and interest rate?
The interest rate is the cost of borrowing the principal. APR (Annual Percentage Rate) includes the interest rate plus fees (origination, documentation, etc.), giving you the true cost of the loan. APR is always equal to or higher than the interest rate. Use APR when comparing loans from different lenders to see the complete picture.
Q:Should I buy gap insurance?
Gap insurance covers the difference between what you owe and the car's value if it's totaled. It's highly recommended if you put less than 20% down, have a loan longer than 60 months, or bought a vehicle that depreciates quickly. It costs $400-700 for the loan term from dealers, but your auto insurer may offer it for $20-40/year - check both options.
Q:How accurate is this car payment calculator?
This calculator uses the same amortization formula that banks and credit unions use, so the monthly payment is accurate. However, your actual payment may include additional costs like sales tax, registration fees, and insurance that vary by location. The calculator shows your loan payment only - add these costs separately for your total monthly car ownership cost.