Extra payments cut both time and interest. This guide shows how much, with a worked example.
Updated November 2026
How extra payments work
On a standard car loan, interest is charged each month on the remaining balance. An extra payment applied to principal lowers that balance immediately, so every later month carries less interest and the loan ends sooner. Test your own numbers in the auto loan payoff calculator.
Worked example
You owe $18,000 at 6.5 percent with 48 months left. The regular payment is $426.87 and the interest over the rest of the loan is $2,489.72. Add $100 a month and the loan is paid off in 38 months, 10 months early, with total interest of $1,958.49. That saves $531.22. Add $200 a month instead and the payoff comes in 32 months with $1,617.60 of interest, saving $872.12.
The formulas
In Excel the payment is =PMT(6.5%/12,48,-18000) and the months with an extra $100 are =NPER(6.5%/12,-(PMT(6.5%/12,48,-18000)+100),18000) using the NPER function. That returns about 37.9, which means 38 payments with the last one smaller.
Before you send extra money
- Ask your lender to apply the extra amount to principal, not to the next payment.
- Check for a prepayment penalty. Many auto loans have none, but read the contract.
- Keep your emergency fund intact first. See the emergency fund calculator.
- Compare with refinancing at a lower rate using the auto loan refinance calculator.
Payoff quote vs balance
The amount needed to close the loan is slightly different from the statement balance because interest accrues daily. Ask the lender for a payoff quote with a good-through date. For other loans see the loan payoff calculator.
These are illustrations to help you plan, not financial advice.
Frequently asked questions
How do I pay off my car loan early?
Add an extra amount each month and ask the lender to apply it to principal.
How much interest will $100 extra a month save?
About $531.22 on the $18,000 example.
Is there a prepayment penalty?
Some loans have one. Check the contract or ask the lender.
Why is my payoff amount different from my balance?
Interest accrues daily, so the payoff quote includes interest through the payoff date.