Your loan
Applied straight to principal. Watch the payoff date and total interest change.
Sets the depreciation curve used for the equity timeline below.
When do you stop being underwater?
A new car loses value fastest in the months right after you buy it, while your loan balance comes down slowly because early payments are mostly interest. For a while those two lines cross in the wrong order: you owe more than the car is worth. That gap is negative equity, and it matters because if the car is totalled or you need to sell, the payout will not clear the loan.
The table below tracks both numbers month by month for the loan you entered.
| Month | Loan balance | Car value | Equity | Status |
|---|
What each term costs you
Dealers usually present car loans as a monthly payment, which makes a longer term look like a discount. It is the opposite. Here is the same loan amount across every common term, calculated from the numbers you entered above.
| Term | Monthly | Total interest | vs 60 months |
|---|
Payment schedule
| # | Payment | Principal | Interest | Balance |
|---|
How the numbers work
What you actually finance
The amount financed is not the sticker price. It is the price, plus sales tax on that price, plus dealer and registration fees, minus your down payment and any positive trade-in equity. Sales tax is the piece people forget: at 7% on a $35,000 car that is $2,450 added to the loan, and you pay interest on it for the full term.
Why early payments barely move the balance
Auto loans use simple interest on the outstanding balance. Each month the lender takes the balance, multiplies by one twelfth of the APR, and that amount comes off the top of your payment. Whatever is left reduces principal. At the start the balance is large, so interest eats a big share; by the end the balance is small and almost all of the payment is principal. This is why the schedule above looks lopsided, and why an extra $50 a month in the first year does more good than $50 a month in the last year.
Rolling negative equity into a new loan
If you trade in a car you still owe money on and the balance exceeds its value, dealers will often offer to roll the difference into the new loan. It makes the deal feel painless. What it actually does is start the new loan already underwater, on top of the new car's own first-year depreciation, which typically extends the underwater period by years. Entering a trade-in value of zero above and adding the shortfall to the vehicle price gives a rough picture of the effect.
Gap insurance
Gap insurance covers the difference between what your insurer pays for a totalled car and what you still owe. It is worth considering specifically during the months the table above shows negative equity, and generally not worth paying for after the break-even month. The Consumer Financial Protection Bureau publishes plain-language guidance on auto loans and add-on products.
Questions people ask about car loans
What does it mean to be underwater on a car loan?
You are underwater, or "upside down", when the balance remaining on your loan is larger than what the car would sell for. It happens because a new vehicle loses value fastest in its first two years while the loan balance falls slowly, since early payments go mostly to interest.
The practical risk: if you total the car or need to sell it while underwater, the insurance payout or sale price will not clear the loan, and you owe the difference in cash on a car you no longer have.
How long am I underwater on a 72-month loan?
It depends almost entirely on your down payment. With nothing down on a typical new car, a 72-month loan commonly keeps you underwater for the first three to four years. Putting 20% down usually closes the gap within the first year.
Rather than relying on the general rule, set the term to 72 above and read the break-even month for your own numbers.
How much should I put down on a car?
The common guideline is 20% on a new car and 10% on a used one. The logic is that it roughly offsets first-year depreciation, so you never go underwater. A larger down payment also cuts the loan amount, which reduces both the monthly payment and the total interest.
Is a 72 or 84-month car loan a bad idea?
Long terms lower the monthly payment but raise the total cost substantially and stretch out the underwater period. The term comparison table above shows the difference for your loan.
There is a second effect that the table understates: lenders typically charge a higher APR on 72 and 84-month loans because the collateral is worth less relative to the balance for longer. So the real penalty is usually bigger than a same-rate comparison suggests.
Does a trade-in count as a down payment?
Positive trade-in equity reduces the amount financed exactly like cash does. But if you still owe more on the trade-in than it is worth, that negative equity typically gets rolled into the new loan, which increases the new balance and makes it likely you start out underwater.
Can I pay off a car loan early?
Almost always, and it saves real money because interest accrues on the outstanding balance. Check your contract for a prepayment penalty — uncommon, but legal in some states.
The simplest method is adding a fixed amount to every payment. Use the extra payment field above to see what any amount saves you in interest and how many months it removes.