Balance over time
Early payments are mostly interest, so the balance line curves — the table below is the same schedule year by year.
Remaining balance, end of each year
| Year | Principal paid | Interest paid | Balance |
|---|
How it works
The loan amount isn't the sticker price — it's the price minus whatever you're not financing, which is your down payment and your trade-in value. From there, an auto loan works exactly like any other fixed-rate amortizing loan: every payment is the same size, but early payments are mostly interest because interest is charged on the full remaining balance, which is largest at the start. As the balance shrinks, more of each fixed payment goes toward principal.
principal P = price − down payment − trade-in value
monthly rate r = APR ÷ 12 ÷ 100, n = term (months)
payment = P × r × (1+r)ⁿ ÷ ((1+r)ⁿ − 1)
each month: interest = balance × r, principal = payment − interest, balance −= principal
Worked example
A $30,000 vehicle with a $3,000 down payment and a $2,000 trade-in, financed at 6% APR over 60 months.
- Principal: $30,000 − $3,000 − $2,000 = $25,000.
- Monthly rate: 6% ÷ 12 = 0.5%. Payments: 60.
- Payment = $25,000 × 0.005 × (1.005)⁶⁰ ÷ ((1.005)⁶⁰ − 1) = $483.32/month.
Over 60 payments, total paid comes to about $28,999 — roughly $3,999 in total interest on the $25,000 financed.
Common questions
How does a trade-in affect my loan?
Your trade-in value is subtracted from the vehicle price before the loan amount is calculated, the same way a down payment is — it directly reduces how much you need to finance, and therefore your monthly payment.
Why is total interest so much higher on longer terms?
A longer term spreads the same principal over more months, which lowers the monthly payment — but you're paying interest on a larger remaining balance for longer, so the total interest paid over the life of the loan goes up even though each payment is smaller.
Does this include taxes, fees or add-ons?
No — this calculates the loan itself from the principal you enter. Sales tax, registration fees, and dealer add-ons vary by location and should be added to the vehicle price before entering it here if you're financing them too.