How extra payments shorten a car loan
Each month, part of your car payment covers interest and the rest reduces the balance. Any extra amount goes straight to the balance, so next month's interest is smaller and more of every later payment pays down the loan. That is why even a small extra payment can cut months off the loan and save hundreds in interest.
Car loan payoff formula
New balance = balance + interest − (payment + extra)
Repeat until the balance reaches zero
Payment to finish in n months = B × r ÷ (1 − (1 + r)−n)
Worked example
You owe $18,000 at 7% and pay $450 a month. You have 46 months left and will pay $2,557.11 more in interest. Add $100 a month and the loan is gone in 37 months, 9 months sooner, saving $524.66. Put a $1,000 lump sum toward it today as well, and it is paid off in 35 months with $756.31 saved.
Want it done in two years? You would need to pay $805.91 a month.
Should you pay off your car loan early?
- Yes, usually, if your rate is high and you already have an emergency fund.
- Pay off higher-rate debt first, such as credit cards, before making extra car payments.
- Check for prepayment penalties and simple-interest terms in your contract; most US auto loans are simple interest, so extra payments save money.
- Tell the lender the extra is for principal, not for next month's payment.
- A very low promotional rate (0% to 3%) may not be worth paying off early if your savings earn more.
Thinking of refinancing instead? Compare with the auto refinance calculator, or see your full loan schedule with the car loan calculator.
Frequently asked questions
How much do I save by paying extra on my car loan?
It depends on your balance, rate and time left. On an $18,000 balance at 7% with a $450 payment, an extra $100 a month saves about $525 in interest and ends the loan 9 months sooner.
Is it better to make one extra car payment a year or pay a little extra every month?
Paying a little extra every month saves slightly more, because the balance drops sooner, but both work. What matters most is that the extra goes to principal.
Does paying off a car loan early hurt your credit?
Your score may dip slightly when an installment account closes, but the effect is usually small and temporary. Saving interest is normally worth more.
How do I calculate the payment needed to pay off my car in a set time?
Use the payment formula with your balance, monthly rate and the number of months you want. $18,000 at 7% over 24 months needs about $805.91 a month.
More car calculators
Last updated October 2026.