Car loan and affordability calculator

Calculate your car loan payment and affordability

2026 ESTIMATE. Payment math: the standard loan amortization formula, M = P × r × (1+r)ⁿ / ((1+r)ⁿ - 1), where P is the amount financed, r is the monthly interest rate (APR / 12), and n is the term in months. The insurance and fuel default is a rough national estimate derived from AAA's 2025 "Your Driving Costs" study; your own cost varies by vehicle, driving record, location, and coverage. Sales tax defaults to an illustrative rate; use your own state and local combined rate for an exact figure.

How does a car loan payment work?

A car loan payment is built from two pieces: principal (the amount you actually borrowed) and interest (what the lender charges for lending it). Each month's payment is the same fixed amount, but the mix shifts over time. Early payments are mostly interest, because the balance you owe is at its highest; later payments are mostly principal, because the balance has shrunk. This is standard amortization, the same method used for mortgages and student loans.

The amount you finance is not the sticker price. It is the vehicle price plus sales tax, minus your down payment and any trade-in value the dealer credits you. That financed amount, not the vehicle price, is what the loan formula actually runs on, which is why a bigger down payment or a trade-in shrinks your payment more directly than negotiating a small discount off the price.

What is the 20/4/10 rule for car loans?

The 20/4/10 rule is a budgeting check for a car purchase: put 20% down, finance for no more than 4 years (48 months), and keep your total monthly car cost, meaning the loan payment plus insurance and fuel, under 10% of your gross monthly income. It is not a law or a lender requirement; it is a rule of thumb from consumer-finance educators for staying financially safe on a depreciating asset.

Source: Chase, "What Is the 20/4/10 Rule for Car Buying?" and LendingTree, "20/4/10 Rule."

A loan can pass some checks and fail others, so run all three together, not one at a time. The default example above fails all three: the down payment is too thin, the term runs past four years, and a thin down payment plus a long term both push the monthly payment, and so the total car cost, above 10% of income. The checks are connected: fixing the down payment or the term usually improves the income check too.

Why is a 72 or 84 month car loan a bad idea?

A 72 or 84 month term lowers the monthly payment on paper, but it does that by spreading the same amount financed over more months at interest, which increases the total interest you pay and keeps you "underwater" (owing more than the car is worth) for longer, since a car depreciates faster than a long loan pays it down. Using the $32,100 amount financed from the default example above at the same 7% APR, here is what only changing the term does:

Math: the amortization formula above, run three times on the same $32,100 amount financed and 7% APR, varying only the term.

Stretching from 60 to 84 months cuts the payment by about $152 a month, but it adds roughly $2,559 in extra interest and takes seven years, not five, to reach zero balance. Meanwhile the car itself loses most of its value in the first few years. That combination, a slow-shrinking loan balance against a fast-shrinking car value, is how a long-term loan buyer ends up owing more than the car is worth for years at a stretch, sometimes for most of the loan.

How does your credit score affect your car loan APR?

Your credit score is the single biggest driver of the APR a lender quotes, often mattering more than the specific lender you choose. Experian's State of the Automotive Finance Market report tracks average new and used car loan rates by credit tier each quarter:

Source: Experian, "State of the Automotive Finance Market," Q1 2026.

The gap between the top and bottom tiers is over 11 percentage points on a new car loan. Run your own price and term through the calculator above at both ends of that range to see what it costs in dollars, not just percentage points; on a typical loan the difference runs into thousands of dollars in interest over the term. For where your own score falls and what moves it, see what is a good credit score.

What is the amount financed, and why is it different from the price?

The amount financed is what the loan formula actually runs on: vehicle price, plus sales tax, minus your down payment, minus any trade-in value. Two purchases with the same sticker price can carry very different loan payments depending on the down payment and trade-in, because those two numbers reduce the balance the lender is actually financing, dollar for dollar. Sales tax works the other way: it usually gets added to the amount financed unless you pay it in cash, which is a detail shoppers who fixate on "negotiating the price" often overlook.

This is also why a bigger trade-in or down payment is a more reliable way to shrink your payment than haggling a percent or two off the sticker price. A $2,000 increase in your down payment reduces the amount financed by the full $2,000; a 2% price discount on a $35,000 car only reduces it by $700, before financing costs.

How much car can you actually afford?

The honest answer is whatever price lets your loan pass all three parts of the 20/4/10 rule at a down payment and term you can actually manage, not the maximum a lender will approve you for. Lenders qualify you based on your ability to make the payment against your total debt, which leaves out insurance, fuel, maintenance, and everything else a car actually costs to run. That gap is exactly what the 20/4/10 rule is designed to close: it is a stricter, more conservative check than a lender's approval, on purpose.

If your numbers fail the down payment or term checks, the most direct fix is a cheaper car or a bigger down payment, not a longer loan. A longer loan makes the monthly number look better while making the total cost and the ownership risk worse, as the term comparison table above shows. If you are weighing a lease instead of a loan, the trade-offs are different: see the car lease calculator to compare a lease payment against a purchase on the same car. For the full picture on financing, ownership, and leasing math, start at the auto hub.

The flat truth: the payment is not the deal

A car loan is a trade between what you owe today and what you pay over time. A longer term or a smaller down payment makes the monthly number smaller, but it does not make the car cheaper; it makes the loan more expensive and keeps you exposed longer to owing more than the car is worth. The 20/4/10 rule exists because the payment alone hides both of those costs. Run your actual price, down payment, and term through the calculator above before you sign, not after, and check all three boxes, not just the one the dealer points to.