etting an auto loan is a significant financial commitment, so it's wise to do your research beforehand. The ability to repay the debt is crucial when applying for a loan. Unfortunately, most Americans take out car loans that are beyond their means. Doing so not only results in loan rejection but also increases the potential of subsequent auto loan default.

This article highlights the significance of estimating the EMIs and selecting a plan that fits one's needs and budget. You may better plan your finances and funding for a car purchase by using an online auto loan calculator to get an idea of what your monthly payments might be.

Car shopper with a calculator
Source: jcomp (freepik)

What Are Auto Loan Calculators?

When you borrow an auto loan, you need to pay fixed monthly payments, also known as Equated Monthly Installments (EMI), which consist of principal and interest payments. Mathematically, the EMI is calculated as:

EMI = P × r × (1 + r)n/((1 + r)n - 1)


P = Principal

R = Interest rate

N = Loan term

But, it takes time and effort to calculate the EMI manually. Thus, auto loan calculators are the tools that simplify the process by providing you with the estimated monthly payments in a matter of seconds. All you need to do is enter the required information and hit calculate.

Terms Used In Auto Loan Calculator

Vehicle Cost

Vehicle cost refers to the amount of loan you want to borrow to purchase a vehicle. Thus, if there are any down payments, traders' discounts, rebates, or trade-ins, subtract them from the purchase price to calculate the amount you need to fund through the auto loan.

Trade-In Value or Down Payment

Generally, when you purchase a vehicle, you need to pay certain down payments. It is the upfront amount that should be paid at the time of the purchase. There is no specified rule, but generally, it ranges from 10% to 20%. Similarly, trade-in value is the amount that the dealer offers to exchange a used car for a new car.

Loan Terms

Loan terms refer to the amount of time you have to repay the borrowed loan. Generally, the longer the term, the lower the monthly payment, but with a higher interest rate. Similarly, if there are short loan terms, you will have an increased monthly payment but a lower interest rate. The loan term differs according to the lenders and contract, but the average loan term for an auto loan is six years.

Interest Rate or Annual Percentage Rate (APR)

The interest rate is the cost of borrowing a loan. The rate differs based on several factors, including your credit score, income, loan term, and loan amount.

New/ Used Car

Interest rates are higher for used cars than for new vehicles. This is because the resale value of the used car is comparatively lower.

Credit Score

A credit score is a three-digit number that rates your credit worthiness. The credit score ranges from 300 to 850; the interest rate will be lower if you have higher credit scores. This is because the lenders consider people with high credit scores low-risk and less likely to default on the loan. Likewise, you will have high-interest rates if you have a low credit score.

Sales Tax

The sales tax is the consumption tax imposed by the government on the sale of goods and services. You need to pay sales tax for a new and a used car. The tax rate differs according to the car's price, the state you live in, and government policies. Here are some states that do not charge any sales tax:

  • Alaska
  • Delaware
  • Montana
  • New Hampshire
  • Oregon

Also read: Auto-Financing And Checklist For The First Time Car Buyer.

Top 5 Auto Loan Calculators


Cars.com is a leading digital marketplace and solutions provider connecting car shoppers and sellers. The company was launched in 1998 and is headquartered in Chicago. The company empowers car customers with the data, resources, and digital tools required to make informed buying decisions and connect with automotive retailers.

The Cars.com calculator helps to estimate the monthly car loan payments and shop cars in the budget. You would require to add the following information and calculate the estimated monthly payments :

  • Price of the vehicle you want
  • Down payment (optional)
  • Trade in value (optional)
  • Length of loan
  • Annual percentage of rate (APR)
  • Sales tax


Bankrate is an industry-leading online financial publisher that provides free financial resources, including product comparison tools, financial calculators, reviews, and editorial content. Founded in 1976, the company has earned the customer's trust and has become the go-to source for all financial things.

The Bankrate calculator helps estimate the car's monthly payment and compare the loan rates to find cheaper loan options. You're required to add the following information for the calculation:

  • How much are you looking to borrow?
  • Time to maturity
  • Is the vehicle new or used?
  • The interest rate or find the rate


Carmax.com is a used car dealer website that offers the nation's most extensive used car inventory. It provides a wide range of second-hand cars and can be searched based on the types, brands, price, lifestyle, location, and popular picks. It offers a 24-hour test drive, 30-day returns, and significant system coverage on every used car.

The Carmax.com calculator helps estimate a car's monthly payment and shop for the car on a budget. You would require to add the following information:

  • Vehicle Price
  • Down Payment
  • State
  • Credit score
  • APR
  • Term length


Investopedia is a financial website dedicated to providing financial literacy to readers and helping them make informed financial decisions. It is a part of Dotdash Meredith's publishing company. The company was founded in 1999 and has provided information on personal finance, reviews, financial news, and updates to its readers. The company has received several awards such as the 2021 Best In Business Awards, Newsletter, 2020 Dotdsash named publisher of the year, 2018 financial content marketing award, and more.

Investopedia calculator helps to estimate the monthly payment for the car, and you would need to input the following information:

  • Car price
  • Down payment
  • Loan term
  • The interest rate or credit score

Ally Bank

Ally Bank is a full-service online bank that offers various financial services, including personal loans, auto loans, mortgage loans, and checking and saving accounts. It has its headquarters in Sandy, Utah, and was established in 2009. It is the online-only banking division of Ally Financial Inc., which has been in business since the 1920s.

Ally.com calculator helps to estimate the monthly payment for a car, and you need to provide the following information :

  • Finance amount
  • APR
  • Term in months


It's always best to know your finances beforehand and plan accordingly. Auto loan calculators can help you estimate your monthly payments and find the best deal. It helps to determine the borrowing limits and how much of the monthly payments you can afford. Preparing for loan repayment in advance allows you better manage your finances and prevent yourself from financial distress.


Aug 15, 2022
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