Enter the vehicle price, your deposit or trade-in, the rate and the term. You get the monthly payment, the total interest over the life of the loan, and the share of the price you are actually financing - the number that tends to surprise people once a long term is involved.
A vehicle loan is a fixed-rate amortising loan, the same arithmetic as a mortgage over a much shorter term. The monthly payment comes from P = L x r / (1 - (1 + r)^-n), where L is the amount financed, r is the annual rate divided by twelve and n is the number of months.
Borrow 28,000 at 7.5% over 60 months and the payment is 561.06. Over the full term you repay 33,664, so the finance costs 5,664 — a fifth of what you borrowed, on a car that will be worth roughly half the purchase price by the time you finish paying.
The interest rate is what accrues on the balance. The APR folds in the fees you are charged to obtain the loan — origination, documentation, and anything else rolled into the financing. Lenders must quote the APR, and it is the only figure that compares two offers honestly. A 6.9% rate with a 600 fee costs more than a 7.4% rate with none.
Enter the APR here rather than the headline rate, and the total will reflect what you actually pay.
Dealers negotiate on the monthly payment because almost any payment can be reached by stretching the term. The same 28,000 at 7.5% costs 561 a month over 60 months and 429 over 84 — but 5,664 in interest against 8,076. The lower payment costs 2,412 more.
Longer terms are also where negative equity comes from. A new car loses roughly 20% of its value in the first year and about half over five, while an 84-month loan pays down principal far more slowly than that. For much of the term you owe more than the vehicle is worth, so a write-off or an early sale leaves you paying for a car you no longer have. Gap insurance exists because this situation is now common rather than unusual.
A rule of thumb that has aged well: put down at least 20%, finance for no more than 4 years, and keep total vehicle costs — payment, insurance, fuel, maintenance — under 10% of gross income. It is conservative, and most people financing a new car break at least one part of it. Its value is as a reference point: the further you are from it, the more of your income the vehicle is consuming.
A trade-in reduces the amount financed exactly like a cash deposit. What matters is whether you still owe money on it. If the trade is worth 8,000 and you owe 11,000, the 3,000 shortfall does not disappear — dealers routinely roll it into the new loan, so you begin the next car already 3,000 underwater on top of first-year depreciation.
Enter the trade-in value net of anything still owed, or the figures here will be optimistic.
Manufacturers frequently offer one or the other, not both. A rebate reduces the amount financed immediately; subsidised finance reduces the interest on a larger balance. Shorter terms and smaller amounts tend to favour the rebate; longer terms and larger amounts favour the low rate. Run it both ways rather than assuming — the alternative terms shown above make the comparison a matter of reading two numbers.
Dealer financing is convenient and is sometimes genuinely the cheapest, particularly when a manufacturer is subsidising it. It is also a profit centre, and the rate presented is not always the best the lender would approve. Credit unions and banks will quote you in advance, which turns the dealership conversation into a comparison rather than a negotiation. Arriving with an approved offer costs nothing and frequently saves a point or more.
Credit score first, then loan term, then whether the vehicle is new or used. The spread between the best and worst tiers is commonly several percentage points, which on a five-year loan is thousands. Used-car rates run above new-car rates because the collateral is worth less and depreciates less predictably.
If your score sits near a tier boundary, waiting a few months while it improves can be worth more than any negotiation on the price.
A car loan can be refinanced like a mortgage. It is worth examining when your credit score has improved materially since purchase, when rates have fallen, or when you took dealer financing in a hurry. The obstacle is negative equity: a lender will not usually refinance more than the vehicle is worth, which rules it out during exactly the early period when the rate is costing the most.
Insurance, fuel, servicing, tyres, registration and depreciation. On a mid-range vehicle these routinely add as much again as the finance instalment, and insurance in particular varies enormously by model — a car that costs the same to buy can cost half again as much to insure.
The question worth answering before signing is not whether the monthly payment fits, but whether the total monthly cost of running the vehicle does.
Cars depreciate faster than a long loan amortises, so for years you owe more than the car is worth. If it is written off or you need to sell, the shortfall is yours. Longer terms also multiply the total interest even at the same rate.
Work out both. A rebate reduces the amount financed immediately; subsidised finance reduces the interest on a larger balance. On shorter terms the rebate usually wins, on longer ones the low rate. Run the numbers twice rather than assuming.
Steuervergleich Kanton Zürich — Gemeindesteuern vergleichen (Deutsch)