How to Calculate the Interest Rate on a Car Loan

Couple buying a car


Anytime you take out a car loan, no matter if in Rome or Canton, you’re going to be charged interest, but how much does your interest rate impact your monthly payments? Learn more about this and other interest rate tips such as how to calculate interest rate on a car loan, courtesy of the Riverside Buick GMC finance department.

What is an Interest Rate?

It’s important to know what interest is as well as the factors that impact it before learning how to figure interest on a car loan. If you purchase a car on credit, your lender owns your vehicle until it is paid off. The interest rate you pay is basically a fee you pay the lender for using their money to purchase your vehicle. The interest rates you end up paying your lender are based on a few factors including:

  • Principal Amount: The principal amount is the dollar amount you are looking to borrow.
  • Loan Term: This means the length of time you will be repaying the loan. In general, shorter loan terms equal higher repayments monthly, but less interest paid in the long run. With longer terms, you generally have lower monthly payments, but end up paying more in the long run.
  • Repayment Schedule: Most car payments are done monthly, but if you can make payments more often it could save you money over time. Thanks to compounding interest, when you make more payments you pay less interest.
  • Repayment Amount: With every car loan payment you make, a portion goes to interest and a portion goes to repay your principal.

How to Calculate Auto Loan Interest for First Payment

When trying to figure out how to calculate auto loan interest for the initial payment, don’t stress. It’s simple when you use this quick calculation:

  1. Divide your interest rate by the number of monthly payments you will be making in this year.
  2. Multiply it by the balance of your loan, which for the first payment, will be your whole principal amount.

This gives you the amount of interest you pay the first month, but you can also use our handy payment calculator to help you do the math.

How to Figure Interest on a Car Loan Going Forward

Once you place the down payment, you’ll need to calculate your new balance as well as the interest you’ll be paying in the following months. Here’s how to do this:

  1. Subtract the interest you just calculated from the payment you just made and this will leave you with the amount that you have paid off the loan principal.
  2. Deduct this total from your original principal to get your new loan balance.

We are humans and when doing this math and rounding, you won’t have an exact calculation, but this gives you a good basis for how to calculate the interest rate on a car loan in the future.

Get Help From the Financial Professionals at Riverside Buick GMC

While it can seem a bit overwhelming, the financing professionals at Riverside Buick GMC are more than happy to help you find the lease or loan you’re looking for. We can also help you learn about Gap insurance, show you the difference between used and certified pre-owned models, give you an inside look at the Buick Encore interior, or how to calculate interest on a car on your own before making your way in. Use our online payment calculator tool or contact Riverside Buick GMC to have our finance team help.

More From Riverside Buick GMC

  • 2020 Buick Encore Interior

    The new 2020 Buick Encore interior offers Rome drivers a superior experience across the board. Buick has packed the Encore interior with the latest in tech, convenience, and comfort features to make every trip a relaxing ride. The Encore dimensions offer the cargo space and storage solutions you need to easily bring along all of…

  • What Are the 2020 GMC Acadia Trim Levels?

    The 2020 GMC Acadia is available in four trim levels: SLE, SLT, AT4, and Denali configurations. As you move up the line, you’ll gain access to V6 engine power, upscale interior features, and cutting-edge technologies. No matter if you’re looking for a front- or all-wheel drive model, the GMC Acadia trim levels have you covered….

  • 2020 GMC Sierra Towing Capacity

    The 2020 GMC Sierra 1500 maximum towing capacity reaches up to 13,400 pounds when properly equipped. This makes this model the ideal light-duty pickup for Rome drivers and beyond. Learn more about the GMC Sierra towing capacity, Sierra towing features, and more before you get behind the wheel of your favorite GMC Sierra truck at…

Saved
Saved Vehicles ×

SAVED VEHICLES

You don't have any saved vehicles!

Look for this link on your favorites:

Save

Once you've saved some vehicles, you can view them here at any time.

Contact
Contact Us ×

770-382-5910

Call Now

125 S Dixie Ave • Cartersville, GA 30120

Get Directions

Today's Hours:

Open Today! Sales: 8:30am-7pm

Open Today! Service: 7:30am-5:30pm

Open Today! Parts: 7:30am-5:30pm

Riverside Buick GMC

125 S Dixie Ave Cartersville, GA

Phone: 770-382-5910

http://maps.google.com/?q=125%20S%20Dixie%20Ave%20%2C%20Cartersville%2C%20GA%2030120

Parts

Phone: (770) 383-1821

125 S Dixie Ave Cartersville, GA

Sales

Phone: (770) 383-1821

125 S Dixie Ave Cartersville, GA

Service

Phone: (770) 383-1821

125 S Dixie Ave Cartersville, GA
34.1627941 -84.7896022
[schema type="organization" orgtype="LocalBusiness" url="www.riversidegmcbuick.net" name="Riverside Buick GMC" description="" street="125 S Dixie Ave" city="Cartersville" state="GA" postalcode="30120" country="US" email="dennis@riversideautogroup.com" phone="770-382-5910" logo="https://di-uploads-development.dealerinspire.com/riversidebuickgmc/uploads/2018/04/RiversideBuickOGImage.png"]
Riverside Buick GMC
Riverside Buick GMC
125 S Dixie Ave
Cartersville, GA, 30120 US
770-382-5910
https://di-uploads-development.dealerinspire.com/riversidebuickgmc/uploads/2018/04/RiversideBuickOGImage.png
Riverside Buick GMC 34.1627941, -84.7896022.