Compare two auto loan offers by monthly payment and total interest

Why the Headline Monthly Payment Misleads

Auto loan shoppers tend to compare monthly payments. Lenders know this, which is why extending the term (6 years or 7 years instead of 4 or 5) produces lower monthly payments that look attractive. The lower monthly usually comes with higher total interest because you are paying for longer. A 30,000 loan at 7% over 4 years costs 4,478 total interest. Same loan over 7 years costs 7,997 — nearly double. The monthly payment dropped from 719 to 453, but the total cost rose 3,519.

The Fair Comparison

Two loans with identical amounts and terms are directly comparable by rate. Different terms require looking at total interest, not just monthly payment. This calculator shows both — monthly payment gap and total interest gap — so you can see where the real savings come from. A 1 percentage point rate difference over 5 years on 30,000 saves roughly 800 in total interest. Over 7 years, the same rate difference saves 1,100. Term length multiplies the impact of rate differences.

Typical Auto Loan Rates by Credit Score

Excellent credit (720+): 5-7% new car, 6-8% used car. Good credit (680-719): 7-9% new, 8-10% used. Fair credit (620-679): 10-13% new, 12-16% used. Subprime (under 620): 14-20% new, 18-25% used. These ranges fluctuate with overall interest rate environment. Shop rates at multiple lenders — banks, credit unions, dealer-arranged financing, online lenders — since the same credit score can produce 1-3 percentage point rate differences across providers.

Prepayment and Balloon Payment Considerations

Some auto loans have prepayment penalties (less common, more in other markets). Balloon loans have large final payments that some contracts structure to produce lower monthly during the term. Both change the real math in ways this calculator does not model. If you see a loan offer with unusual structure (balloon, ARM, deferred-interest), read the contract carefully and run separately rather than using straight amortisation.

Worked Example

Loan 1: 30,000, 6.5% APR, 60 months. Monthly: 587. Total paid: 35,224. Total interest: 5,224. Loan 2: 30,000, 5.5% APR, 72 months. Monthly: 489. Total paid: 35,216. Total interest: 5,216. Loan 2 saves 98 monthly (1,176 over first year) and saves 8 in total interest. The 72-month term almost exactly offsets the 1 point rate advantage. Better cash flow, roughly same total cost. Comparison is close and depends on your cash flow priorities.

What This Calculator Does Not Show

Gap insurance requirements — longer loans often require gap insurance to cover the difference between loan balance and depreciated car value if totaled. This adds 400-700 over loan life. Interest deductibility on business use. Loan-to-value implications — longer loans often require higher down payments. Trade-in impact — some loans bundle the trade-in value into the principal, which affects comparison. Run scenarios separately if these apply.

Beyond Rate: Other Loan Terms Worth Checking

Grace period before first payment. Autopay discount (often 0.25%). Whether the rate is fixed or variable (variable loans risk rate increases during the term). Any bundled products (extended warranties, service contracts) that inflate the amount financed. Late payment fees. Collection policy if you miss payments. A slightly upper rate with better flexibility often beats a lower rate with restrictive terms. Compare the full contract, not just the APR headline, before signing a multi-year commitment worth tens of thousands of units.