Find a Car Loan That Fits Your Budget
Understand how car loans work, compare APR and loan terms, evaluate down payments and dealer financing, and estimate your potential monthly payment before choosing your next vehicle.
Look beyond the monthly payment.
What Is a Car Loan?
A car loan is financing used to purchase a vehicle and repay the borrowed amount over an agreed period, usually with interest and applicable financing costs. The amount you finance, APR and repayment term all influence the payment and overall cost.
The amount financed may be different from the vehicle's advertised price. Taxes, title and registration charges, dealer fees, optional products, your down payment and the value of a trade-in can all affect the final transaction.
Looking only at the monthly payment can make two very different financing offers appear similar. Reviewing the amount financed, APR, loan term and total payments gives you a clearer picture of what the financing actually costs.
Your Monthly Payment Is Only One Part of the Cost
When you finance a vehicle, the lender provides money toward the purchase and you repay that amount according to the loan agreement. Payments generally include principal and finance charges.
APR is an important number when comparing financing because it provides a broader measure of the cost of credit than the interest rate alone. Depending on the loan, certain fees can be reflected in the APR.
The repayment period also matters. A longer term can reduce the required monthly payment, but it can increase the total amount of interest paid over the life of the loan. That makes it important to compare both monthly affordability and total financing cost.
Compare APR and Loan Terms Together
An interest rate represents the cost of borrowing as a percentage. APR is a broader measure that can include the interest rate and certain credit-related fees.
When comparing auto-loan offers, compare APRs under similar circumstances and review the full loan terms. A lower monthly payment does not necessarily mean a lower overall cost if the repayment period is significantly longer.
Lenders can consider credit history, credit scores, income, existing debts, loan amount, down payment, term and whether the vehicle is new or used when determining financing terms.
Review these numbers together.
A Down Payment Can Change the Loan Amount
A down payment reduces the amount you need to borrow. With the same APR and repayment term, borrowing less generally means a lower monthly payment and less interest over the life of the loan.
Your down payment should still fit within your broader financial plan. Keeping money available for emergencies and other near-term needs can be important, so the biggest possible down payment is not automatically the right decision for every buyer.
If you have a trade-in, understand its value and any remaining loan balance before completing the transaction. A remaining balance can affect the amount ultimately financed.
Review Your Credit
Understanding your credit profile can help you prepare for the financing terms you may encounter.
Compare Multiple Offers
Consider banks, credit unions and other lenders before accepting a financing offer.
Know the Out-the-Door Price
Review the complete vehicle price, including applicable taxes, fees and optional products.
Check the Contract
Make sure the final documents match the terms and costs you agreed to.
Prepare Before You Visit the Dealership
Comparing financing before shopping for the vehicle can give you a better understanding of what you may be able to afford and provide a benchmark for evaluating dealer financing.
A preapproval or prequalification, when available, can help you understand potential financing terms before negotiating the vehicle purchase. It can also give you another offer to compare against dealer-arranged financing.
It is also useful to separate the vehicle price from financing. Knowing the out-the-door price can make it easier to evaluate the actual vehicle transaction instead of focusing only on the monthly payment.
Dealer Financing Can Be Convenient, But Compare Your Options
Many dealerships can arrange financing through banks, credit unions or finance companies. This can make the buying process convenient, but the first financing offer you receive is not necessarily the only option.
Direct financing allows you to approach a lender yourself. Having an outside offer can provide a useful reference point when evaluating financing presented at the dealership.
Compare APR, amount financed, loan term and total cost rather than choosing financing solely because it produces the lowest monthly payment.
Consider More Than the Vehicle's Purchase Price
New and used vehicles can have different pricing, depreciation patterns and financing considerations. Lenders may also consider whether a vehicle is new or used when evaluating an application.
With a used vehicle, look beyond the financing offer and consider the vehicle's age, mileage, condition and expected ownership costs.
For either type of vehicle, compare the complete purchase price and financing cost instead of making the decision solely around the monthly payment.
Read the Financing Documents Before Signing
Auto-loan documents contain important information about the financing arrangement. Review the APR, finance charge, amount financed, total of payments, number of payments and monthly payment.
Also review fees, optional products, late-payment provisions and any other terms that could affect the cost of borrowing.
If something in the final paperwork does not match what you negotiated, ask questions before signing. Understanding the contract is an important part of responsible borrowing.
Review the numbers.
Estimate Your Monthly Car Payment
Enter your own vehicle and financing figures to estimate the monthly principal and interest payment, total interest and total payments.
Calculate Your Estimate
This calculator provides an estimate and is not a loan offer. Actual financing costs can vary by lender and transaction.
Enter your vehicle price, down payment, APR and loan term to calculate your estimate.
Actual payments can differ because of lender fees, taxes, insurance, optional products, payment timing and other transaction-specific costs.
Latest Money and Borrowing Insights
Get clear answers to common questions about APR, loan terms, down payments and auto financing.
Common Questions About Car Loans
Lenders may consider credit history and scores, income, existing debts, loan amount, down payment, loan term and whether the vehicle is new or used.
The interest rate represents the cost of borrowing as a percentage. APR is a broader measure that can include the interest rate and certain credit-related fees.
Preapproval or prequalification can help you understand potential financing terms before shopping and provide a useful comparison point when evaluating dealer financing.
No. Dealer financing can be convenient, but comparing offers from banks, credit unions and other lenders can help you evaluate the financing available to you.
Generally, a larger down payment reduces the amount financed. With the same loan terms, that can reduce the monthly payment and total interest.
A longer term can reduce the monthly payment, but it can also increase the total interest paid and extend the time you remain in debt.
Review the APR, finance charge, amount financed, total payments, number of payments, monthly payment, fees, optional products and other loan terms.
Auto-loan rates and other financing terms may be negotiable. Comparing multiple offers can give you a useful basis for evaluating and negotiating the financing.
Know What Your Car Will Really Cost Before You Drive It Home
Compare the vehicle price, down payment, APR, loan term and estimated financing cost so you can make a more informed car-buying decision.