What Does It Cost to Pay Off Your Car Loan Early?
If you come into extra cash, paying off the rest of your car loan in one lump sum is tempting. But most auto loans include an early payoff penalty clause, so settling the balance ahead of schedule adds an extra fee on top of what you owe. Lenders charge this to recoup some of the interest income they expected to earn, and the rate typically shrinks the closer you are to the end of the loan term.
This calculator takes your remaining loan balance, the penalty rate written into your agreement, the months remaining, and the total loan term, then computes the penalty you'd owe for paying off now along with your total cost. If the penalty comes out to less than 1% of your balance, paying it off early is usually worth it; if it's higher, weigh it against how much interest you'd otherwise pay over the remaining term.
Exact penalty rates and waiver conditions vary by lender and product, so confirm the precise amount with your lender before making an early payoff.
Frequently Asked Questions
Lenders charge this fee to recover some of the interest income they expected to earn over the full loan term. It's written into most auto loan agreements.
It's specified in your loan agreement or the lender's terms. It's typically 1-3% of the remaining balance and often decreases as less time remains on the loan.
It depends on the lender and product. Some loans waive the penalty after a certain period has passed since origination, so confirm with your lender before paying it off.