What this scenario helps you see
To compare offers fairly, hold the amount financed the same first. A dealer can show a lower payment by changing the deposit, the term, the financed add-ons or the trade allowance, so note each change instead of crediting it all to the rate.
A four-year loan pays down principal faster than a six-year loan at the same rate. The comparison table shows both the higher monthly cost and the interest you save, so you can judge the trade against your cash flow.
APR can include fees that aren't part of the contract interest rate. The schedule here uses the nominal annual rate you enter. Before you accept an offer, check the lender's disclosures for amount financed, finance charge, payment and APR.
Test a different rate
| Annual interest | Monthly payment | Total interest |
|---|---|---|
| 6% | $469.70 | $2,545.66 |
| 8% | $488.26 | $3,436.41 |
| 10% | $507.25 | $4,348.13 |
Method and limitations
The model uses fixed monthly amortization: M = P × r ÷ (1 − (1 + r)^−n), with principal P, monthly rate r, and n payments. At zero interest, payment is P ÷ n. Interest and payments are rounded monthly, and the last payment reconciles the balance. See the complete loan methodology for assumptions and sources.
Daily-interest contracts, prepaid finance charges, late payments, and lender rules can produce a different result. This page is an educational example, not a rate quote or approval. CFPB explains loan terminology and disclosures.
Questions about this example
Does $20,000 mean the car's sticker price?
Not here. In this scenario it's the amount financed, with no deposit and no extra fees. A real sticker price could be higher if you pay part in cash or finance other costs.
Why compare 48 and 72 months?
Because it shows how stretching the same balance changes the payment and the total interest. A lower required payment usually means a longer debt and a higher total cost.
Can I compare an offer that includes fees?
Yes. First decide whether each fee is paid in cash or financed, add only the financed ones to the principal, and compare the APR disclosures separately.
Is 8% a typical current used-car rate?
This page makes no claim about current rates. Eight percent is a made-up input used to explain the math.
