1. What is Car Loan Interest?

Car loan interest is the additional amount you pay to the lender for borrowing money to purchase a vehicle. It represents the cost of borrowing and is calculated based on the principal amount, interest rate, and loan term.

2. How Does the Calculator Work?

The calculator uses a simple formula:

Where:

• Total Payments — The sum of all payments made over the life of the loan
• Principal — The original amount borrowed to purchase the car

Explanation: This calculation shows the true cost of borrowing by revealing how much extra you pay beyond the car's purchase price.

3. Importance of Interest Calculation

Details: Understanding your total interest helps you evaluate loan offers, make informed decisions about loan terms, and potentially save money by refinancing or making extra payments.

4. Using the Calculator

Tips: Enter the total of all payments you'll make (monthly payment × number of months) and the original loan amount. Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How can I reduce my total interest paid?
A: You can reduce interest by choosing a shorter loan term, making a larger down payment, or refinancing to a lower interest rate.

Q2: Does this include other fees?
A: No, this calculates only the interest portion. Additional fees (origination, documentation, etc.) would be extra.

Q3: Why is my interest higher than expected?
A: Longer loan terms and higher interest rates significantly increase total interest. Even small rate differences add up over time.

Q4: How does this compare to an amortization schedule?
A: This shows the total interest, while an amortization schedule breaks down how much goes to principal vs. interest each month.

Q5: Is interest tax deductible?
A: Generally no, unless the vehicle is used for business purposes (consult a tax professional for your specific situation).