AmortMapWhat a given loan amount actually costs per month, and over its life.

Monthly payment on a $18,000 car loan at 8%

$18,000 at 8%
$365per month over 60 months
$316 over 72 months, $439 over 48 — the same debt, 1,630 dollars apart in interest
Monthly payment by term$43948 mo$3,093 interest$36560 mo$3,899 interest$31672 mo$4,723 interest$28184 mo$5,566 interestThe bars fall, the interest rises — $1,630 more from 48 to 72 months
48-month payment$3,093 total interest$439
60-month payment$3,899 total interest$365
72-month payment$4,723 total interest$316
84-month payment$5,566 total interest$281
Cost of stretching 48 → 72saves $124 a month and costs that much over the loan$1,630
Underwater until roughlyon a 72-month loan, against a −20% first year and −15% a year aftermonth 33
Per $1,000 borrowedat 8% over 60 months$20.28

Notes

  • The term does more to the payment than the rate does. Moving this loan from 48 to 72 months drops the monthly figure by $124, which no realistic rate negotiation would achieve. It also adds $1,630 in interest. A dealer who asks "what payment are you looking for" is asking which term to sell you, not which price.
  • Negative equity is the real cost of a long term. A car loses roughly a fifth of its value in the first year. On 72 months this loan is worth less than it owes until about month 33 — and trading in during that window rolls the shortfall into the next loan, where it earns interest again.
  • The advertised rate belongs to a credit tier, not to the car. Spreads between the best and worst tiers run 10 percentage points or more on used vehicles, which on this amount is the difference between $323 and $410 a month.
  • Sales tax, title and fees are financed too, unless you pay them separately. They add roughly 6–10% to the amount borrowed in most states, so the payment above understates the real bill by about that much whenever the figure quoted is the sticker price rather than the amount financed.

The short answer

A $18,000 car loan at 8% is $365 a month over 60 months.

Stretch it to 72 and the payment falls to $316. Shorten it to 48 and it rises to $439. Same car, same rate — $1,630 apart in total interest.

Every term, side by side

Term Payment Total interest
48 months $439 $3,093
60 months $365 $3,899
72 months $316 $4,723
84 months $281 $5,566

The term moves the payment more than the rate does

Going from 48 to 72 months drops the monthly figure by $124. No rate negotiation available to an ordinary buyer does that — a full percentage point off the rate is worth a fraction of it.

That is why the question "what monthly payment are you looking for?" is asked before the price is settled. Answering it tells the desk which term to write, and the term is where the money is.

Being underwater is the real cost of a long term

A new car loses roughly a fifth of its value in the first year and about 15% of the remainder each year after. Debt on a 72-month loan comes down slower than that for a long time.

On this loan the balance stays above the car's value until month 33. Trading in before then means rolling the shortfall into the next loan, where it earns interest a second time.

Gap insurance covers the same shortfall for a total loss, not for a voluntary trade — those are different problems with similar arithmetic.

What the sticker price leaves out

Sales tax, title, registration and dealer fees are usually financed along with the car. In most states they add 6–10% to the amount borrowed.

So a $18,000 car is rarely a $18,000 loan. The figure to put in a calculator is the amount financed on the contract, not the price on the window.

The rate belongs to a credit tier

Advertised rates are for the top tier. The spread to the bottom tier runs ten points or more on used vehicles — which on this amount is the difference between roughly $365 and a payment half again as large.

Checking a rate with a credit union before walking in converts that from an unknown into a number you already hold.

Nearby sizes

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