Car Loan Calculator

Five years balances two competing pressures fairly well for most buyers: it is short enough that the loan is typically paid off well before the car's value has depreciated down near the outstanding balance — avoiding the situation of owing more than the car is worth, sometimes called being "underwater" on the loan — while remaining long enough to keep the monthly payment within reach for an average-priced vehicle. Terms considerably longer than this are increasingly offered by lenders but push the total interest paid meaningfully higher, since interest keeps accruing across more months on a balance that a longer term causes to fall more slowly.

A larger deposit reduces the loan's principal directly, which lowers both the monthly payment and the total interest paid over the term — a straightforward relationship. It also does something specific to vehicle finance beyond that: a car depreciates immediately and continues losing value throughout the loan term, and a larger deposit keeps the outstanding loan balance below the car's actual resale value for a larger portion of that term, which matters directly if the vehicle needs to be sold or the loan refinanced before it is fully paid off.