How Much Will My Monthly Car Payment Be?

Get Car Financing
Even with poor credit.

By

Contributing Writer

David Topham covers the automotive and auto finance industries as the Content Manager of Auto Credit Express who also contributes to CarsDirect. He was born and raised in Michigan and is a graduate of Michigan State University.


, Contributing Writer - April 27, 2018

A monthly payment on a car loan can be calculated by dividing the loan amount by the loan term while factoring in interest, and borrowers need to make sure their payment fits into their budget.

Average Monthly Payments for a Car Loan

According to Experian, the average payment on a new car loan was $515 and the average used car payment was $371 in the fourth quarter of 2017. Their data also shows the average loan term was 69.06 months for new vehicles and 64.12 months for used cars.

An average of five and a half years is a long time for car buyers to make payments that high on a vehicle. Borrowers should budget for an auto loan by considering both the monthly payment and the total cost to avoid spending more than they can afford.

A Reasonable Car Payment for Your Budget

Car buying and personal finance authorities agree that consumers shouldn't spend more than 15 to 20 percent of their income on their entire car budget – including insurance, fuel, upkeep, and all of the other costs of vehicle ownership.

Car buyers should figure out a monthly payment that fits their budget before trying to get financed by crunching a few numbers. Borrowers can determine how much they make, calculate what 20 percent of their income is, and estimate how much they'd spend on insurance, fuel and repairs. By subtracting those expenses from 20 percent of their income, a borrower can estimate a monthly car loan payment that fits.

Car buyers can use this desired monthly payment to have an idea of the price range they should be shopping in, which our car loan calculator makes quick and easy.

The Length of Your Car Loan

Borrowers can manipulate their monthly payment by shortening or extending their loan term, but they need to be aware of how this affects the total cost.

Shortening the length of a loan means higher monthly payments but a lower overall cost. Buyers gravitate toward longer loan terms because they want a lower monthly payment, but extending the loan’s length increases the overall cost as more interest charges accrue. Lenders also typically give longer loans slightly higher interest rates with all else being equal.

Let's look at two example loans to see the length's effect on the total cost, one with a loan amount of $22,000, a five percent interest rate, and a 48-month term, and the other with the same loan amount, a six percent interest rate, and a 72-month term:

Monthly Payment Interest Paid Total Cost
48-month loan $506.64 $2,318.97 $24,318.97
72-month loan $364.60 $4,251.53 $26,251.53

The Bottom Line

Budgeting for a monthly payment on a car loan is about finding the right balance between what you can afford each month and what you want to spend in total. Aiming to spend less than 20 percent of your income on your car budget is a good place to start.

If you’ve set your budget but credit problems are making it difficult to get approved for an auto loan, CarsDirect has a solution. We work with special finance dealerships all across the country that understand and know how to handle credit issues. We want to match you with a local dealership that can help. Get started by filling out our secure and free car loan request form online.

Need a Car Loan?

It only takes a minute.

, Contributing Writer

David Topham covers the automotive and auto finance industries as the Content Manager of Auto Credit Express who also contributes to CarsDirect. He was born and raised in Michigan and is a graduate of Michigan State University.


Search New Cars by Loan Payment »

View estimated loan payments based on local rebates and financing offers.

Loan approval is not guaranteed and is subject to credit application and approval of the lender. Individual loan terms may vary. Use of this website constitutes acceptance of CarsDirect.com's Terms of Use, Disclaimer, Privacy Policy, and Cookie Policy.