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

Monthly payment on a $46,000 car loan at 12%

$46,000 at 12%
$1,023per month over 60 months
$899 over 72 months, $1,211 over 48 — the same debt, 6,605 dollars apart in interest
Monthly payment by term$1,21148 mo$12,145 interest$1,02360 mo$15,395 interest$89972 mo$18,750 interest$81284 mo$22,210 interestThe bars fall, the interest rises — $6,605 more from 48 to 72 months
48-month payment$12,145 total interest$1,211
60-month payment$15,395 total interest$1,023
72-month payment$18,750 total interest$899
84-month payment$22,210 total interest$812
Cost of stretching 48 → 72saves $312 a month and costs that much over the loan$6,605
Underwater until roughlyon a 72-month loan, against a −20% first year and −15% a year aftermonth 38
Per $1,000 borrowedat 12% over 60 months$22.24

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 $312, which no realistic rate negotiation would achieve. It also adds $6,605 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 38 — 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 $911 and $1,143 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 $46,000 car loan at 12% is $1,023 a month over 60 months.

Stretch it to 72 and the payment falls to $899. Shorten it to 48 and it rises to $1,211. Same car, same rate — $6,605 apart in total interest.

Every term, side by side

Term Payment Total interest
48 months $1,211 $12,145
60 months $1,023 $15,395
72 months $899 $18,750
84 months $812 $22,210

The term moves the payment more than the rate does

Going from 48 to 72 months drops the monthly figure by $312. 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 38. 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 $46,000 car is rarely a $46,000 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 $1,023 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.

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