Car loans
What a car really costs by the time it's paid off.
New-car loan rate at banks 7.47% Aug 2026
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4 things to know
Costly mistakes
Shopping by monthly payment+$1,755
InsteadStretching to 84 months adds that much interest. Agree on the out-the-door price first, in writing.
Rolling an old loan into the new one$6,884 avg
InsteadKeep the current car longer, or pay the gap down in cash before you trade.
Taking dealer financing without a quote$1,678/pt
InsteadGet pre-approved by a bank or credit union first. Each point of markup costs that much here.
Financing $2,000 of add-ons$2,410
InsteadSay no at the table. GAP is often cheaper from your own insurer.
Missing the new interest deduction$636/yr
InsteadCheck the window sticker for U.S. final assembly and claim it on Schedule 1-A.
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Dealers often offer a cash rebate or a low rate, not both.
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New cars with final assembly in the U.S., for personal use. Not leases or used cars.
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Every number, worked out
An average-priced new car with $5,000 down, financed at the average new-car rate for 72 months.
| The deal | |||
| 1 | Vehicle priceAverage new-vehicle transaction price, July 2026 (Kelley Blue Book) | 49,855.00 | |
| 2 | Sales tax at 6%Example rate; state and local rates vary from 0% to over 10% | Line 1 × 6% | 2,991.30 |
| 3 | Title, registration and doc feeExample; dealer documentation fees vary widely by state | 800.00 | |
| 4 | Out-the-door price | Lines 1 + 2 + 3 | 53,646.30 |
| 5 | Cash down | (5,000.00) | |
| 6 | Amount financed | Line 4 − line 5 | 48,646.30 |
| The loan | |||
| 7 | APRAverage new-vehicle loan rate, Q2 2026 (Experian) | 6.35% | |
| 8 | TermNear the 69.5-month average (Experian) | 72 months | |
| 9 | Monthly payment | L6 × r ÷ (1 − (1 + r)−72), r = line 7 ÷ 12 | 814.27 |
| 10 | All 72 payments | Line 9 × 72 | 58,627.54 |
| 11 | Total interest | Line 10 − line 6 | 9,981.24 |
| 12 | What the car costs you in all | Line 5 + line 10 | 63,627.54 |
| Value versus balance | |||
| 13 | Months the loan is underwaterBalance above the car's estimated value (about 20% lost in year one, then 16% a year) | 5 to 29 | |
| 14 | Deepest gap | 1,882.13 | |
| 15 | Same deal over 84 months: underwater | 4 to 47 | |
| Tax year one (if the car qualifies) | |||
| 16 | Interest paid in the first 12 payments | 2,891.08 | |
| 17 | Tax saved in the 22% bracketCar loan interest deduction, income under $100,000 | Line 16 × 22% | 636.04 |
Sources (7)
- Experian: State of the Automotive Finance Market, Q2 2026: new loans average $43,610 at 6.35% for 69.5 months ($765 a month); used $27,852 at 11.19% (Sep 2026)
- Kelley Blue Book (Cox Automotive): Average new-vehicle transaction price back above $50,000 in August 2026 ($49,855 in July) (Sep 10, 2026)
- Edmunds: Q2 2026: 29.6% of trade-ins toward new vehicles had negative equity, averaging $6,884 (Jul 2026)
- Experian and Kelley Blue Book, citing Carfax: New cars lose about 20% of their value in the first year and are worth about 40% of their price after five years
- Federal Reserve Board: Consumer Credit (G.19): credit card and auto loan interest rates (FRED TERMCBCCALLNS, TERMCBAUTO48NS)
- Internal Revenue Service: Schedule 1-A (Form 1040), Additional Deductions: tips, overtime, car loan interest, seniors (Nov 4, 2025)
- Internal Revenue Service: Tax deductions for working Americans and seniors (2025 to 2028)