How to calculate an auto loan payoff
Each month, interest is calculated from the remaining principal. The required payment covers that interest first, then reduces principal. Extra payments lower principal sooner, so later months accrue interest on a smaller balance.
Monthly interest = remaining balance × APR ÷ 12
Principal paid = total payment − monthly interest
One-time vs. recurring extra payments
A payment made now usually saves more interest than the same dollars spread over later months because it lowers the balance immediately. Keep enough emergency cash before committing a lump sum, and verify that the lender does not charge a prepayment penalty.
Make sure extra money goes to principal
Some servicers treat an overpayment as an early future payment instead of a principal-only payment. Follow the lender’s instructions, check the next statement and confirm that the principal balance fell by the expected amount.
Estimate vs. lender payoff quote
The lender’s official payoff quote may include daily interest through a specific date, late charges or other account adjustments. Use this calculator for planning, then request a dated payoff amount before sending a final payment.