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How much interest is paid on a car loan?
I purchased a new car about a year ago using a 60-month $35,000 car loan with a 6% APR. The interest charged each month always shocks me. I’m curious, how much interest is paid on a car loan?
Jack Walsh · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
You’re certainly not alone in being shocked by how expensive interest on a
car loan
is. There are two ways to see how much interest you pay—you can use an online loan calculator or figure it out by hand. To find out your interest paid by hand, you’ll need the following equation:
A = P x r(1+r)n(1+r)n -1
Where:
- A is the monthly payment
- P is the principal or amount borrowed
- r is the interest rate per month expressed as a decimal
- n is the term or length of the loan expressed in months
To calculate the total interest for your loan:
- Input your values into the formula.
- Multiply A, your monthly payment of $676.65, by the number of months, 60, to find the total amount paid, which is $40,599.00.
- Subtract P, the $35,000 borrowed, from the total amount paid, $40,599.00, to find the total interest paid on your loan is $5,599.00.
After learning you’ll spend $5,599.00 over five years to borrow money, you may want to consider refinancing your loan.
Refinancing is a great way to save money on your car loan’s interest rate. Finding the right lender can be a huge pain that might end up costing you time and money.
Jerry
removes the hassle by giving you one app that instantly connects you with top companies to meet your financial needs. Make sure you’re not overpaying for your car loan by comparing offers from multiple lenders to find the best option for you.MORE: Does refinancing a car hurt your credit score?
View full answer
- Gregory R.
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Jerry partners with more than 50 insurance companies, but our content is independently researched, written, and fact-checked by our team of editors and agents. We aren’t paid for reviews or other content.
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