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How do I compare auto loan offers?

When comparing auto loan offers, look at the annual percentage rate, the interest rate, the length of the loan, and the total amount financed.

When you’re shopping for any loan, it’s important to look at several options so you can compare offers and find the one that’s best for you.

It’s common to focus on the monthly payment, but there are other factors that have more impact on the total costs you’ll pay over the life of your loan. For example, a longer loan term may mean smaller monthly payments, but you’ll ultimately pay more in interest over the life of the loan.

To get a more complete picture, it’s best to compare your offers by looking at:

Learn what things you can negotiate

Understanding the impact of the length of your loan on your total costs

Below is a sample comparison to illustrate how the length of a loan term can impact your monthly payment as well as the total costs you’ll pay. The table uses an example of a $20,000 loan with an interest rate of 4.75%.

Loan Term Monthly Payment Total Interest Paid
36 months (3 years) $597 $1,498
48 months (4 years) $458 $1,999
60 months (5 years) $375 $2,508
72 months (6 years) $320 $3,024

While the longer loan term gives you a lower monthly payment, consider the total cost you’ll pay over the full term of your loan. If you pay off a $20,000 loan in three years, you’ll pay $1,498 in interest. For a six-year loan, however, you will pay $3,024 in interest—more than twice as much.

Some financial experts recommend that your auto loan be five years or less. Longer loans are more likely to result in your owing more than the vehicle is worth.

When you think about your auto loan, it is also important to think about the total cost of ownership. Consider the costs that could be higher for a new vehicle than for an older one, such as taxes and insurance. Other costs will include annual registration fees, maintenance, auto insurance, gas, and repairs.

Use our auto loan worksheet to calculate your potential costs and how much you can afford

See different ways to get an auto loan

You have several options to consider when buying a new car or getting an auto loan. Learn how they can affect your overall money picture.

Read more about the ways to finance your loan