The key numbers
Take a $30,000 loan at 6.9% APR for 72 months. A US offer shows these in a Truth in Lending box; other countries use similar disclosures.
| Line | Example | What it means |
|---|---|---|
| Amount financed | $30,000.00 | The money you are borrowing, after your down payment |
| APR | 6.9% | The yearly cost of the loan, including lender fees |
| Monthly payment | $510.03 | What you pay each month for 72 months |
| Finance charge | $6,722.22 | Everything the loan costs you in interest and lender fees |
| Total of payments | $36,722.22 | Amount financed plus finance charge |
Check that they add up: the monthly payment times the number of payments should equal the total of payments. If it does not, ask why.
Where extra costs hide
Rate markups
When a dealer arranges your loan, it can add a markup on top of the rate the lender approved you for. On this loan, a rate 2 points higher (8.9%) raises the payment to $539.28 and costs $2,106 more over the term. A pre-approval from a bank or credit union tells you what rate you really qualify for.
Add-ons in the amount financed
Extended warranties, GAP coverage, paint protection and service plans are often added to the loan. Adding $3,300 of products raises the payment to $566.13 and costs $4,039 more in total, because you pay interest on them too. Ask for an itemized list and remove anything you did not choose.
Fees
Documentation, origination or arrangement fees may be added to the loan or deducted from it. Either way they belong in the APR, so compare APRs, not just rates.
Payment-only selling
“What monthly payment are you looking for?” lets a seller hit your number by stretching the term or adding products. Negotiate the car’s price first, then the financing.
Check any offer
Enter the price, down payment, term and monthly payment from the offer in the car APR calculator. If the APR it finds is higher than the one quoted, something has been added. The How we calculate page explains the math.
Try it yourself
Open the car APR calculator and enter your own loan. It works in 13 currencies and follows each country’s loan rules.