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Paying cash for a used car avoids interest, but the decision is not settled by comparing a bank balance with an advertised monthly payment. The car’s purchase price, loan fees, APR, term and money retained after the purchase all matter. Two offers cannot be compared fairly if one omits tax or includes a discount unavailable to the other.
This guide calculates loan costs for a hypothetical $20,000 amount using one lender’s published minimum APRs checked October 8, 2026. They are examples, not approvals or recommendations about how much savings to spend. A buyer’s rate can be higher, and membership, the car’s age and mileage, credit and loan terms can change the offer.
Key figures
- $597.53 Example: monthly payment over 36 months
- $380.09 Example: monthly payment over 60 months
- $325.73 Example: monthly payment over 72 months
The same purchase price makes cash and credit comparable
Request the out-the-door cash price and the financed purchase price for the same vehicle. Record tax, title, registration, dealer charges and optional products separately. The dealer fee guide explains why the advertised vehicle price is not the amount required to complete the purchase.
Use the net amount financed after any down payment and trade-in. A $20,000 loan is not necessarily a $20,000 car: taxes or an add-on could be financed, or a down payment could reduce a more expensive purchase to that amount. Keep the purchase worksheet beside the loan disclosure so the inputs agree.
An advertised financing discount is another offer condition. If the financed purchase price is lower, compare that reduction with the added interest and fees over the chosen repayment period. Do not assume a dealer discount can be combined with an outside lender’s minimum APR without confirming both conditions.
Published minimum APRs depend on the car and borrower
Navy Federal’s October 8 schedule lists used-auto minimum APRs of 4.79% for 12–36 months, 5.29% for 37–60 months and 5.39% for 61–72 months. The lender states that the advertised rates assume excellent credit and that offers depend on factors including vehicle model year, mileage, term and loan amount.
Its used category includes 2024 and older model years or any model year above 30,000 miles. Its separate new category can include some later-model used vehicles. These are the lender’s pricing definitions, not a general rule that a dealer’s used vehicle must receive the used schedule everywhere.
Obtain a loan offer for the chosen VIN and amount before treating any minimum rate as available. A longer term is also a different product price, so a comparison using the same APR for every term might miss a real rate increase. Preapproval conditions and expiration dates belong beside the quoted rate.
Longer repayment reduces the payment and increases interest
The worksheet below assumes a fixed-rate loan, equal monthly installments, no additional fees and no early payment. It uses the published APR as the calculation rate because there are no assumed extra finance charges. Figures are rounded; a lender’s final-payment rounding can differ.
| Hypothetical $20,000 amount financed | 36 months | 60 months | 72 months |
|---|---|---|---|
| Calculation APR | 4.79% | 5.29% | 5.39% |
| Monthly payment | $597.53 | $380.09 | $325.73 |
| Sum of scheduled payments | $21,511.23 | $22,805.26 | $23,452.50 |
| Interest above principal | $1,511.23 | $2,805.26 | $3,452.50 |
Source note: Navy Federal’s October 8, 2026 minimum used-auto APR schedule; payments calculated by this guide with monthly rate APR ÷ 12. Purchase amount and absence of fees are assumptions, not a lender quote. Totals use unrounded calculated payments.
- 36 months at 4.79%$1,511.23
- 60 months at 5.29%$2,805.26
- 72 months at 5.39%$3,452.50
Navy Federal October minimum APR schedule; this article's hypothetical loan calculation. No fees; unrounded payments used for totals.
Moving from 36 to 60 months cuts the calculated payment by about $217.44 while adding about $1,294.03 in interest. Extending to 72 months cuts the 60-month payment by about $54.36 and adds about $647.24 more interest. These differences describe the example; they do not measure depreciation, repair costs or a buyer’s approval.
The CFPB’s auto-loan disclosure guidance identifies APR, finance charge, amount financed and total of payments. Check all four on the offer, rather than treating a payment estimate as the finished cost.
A financing discount has to exceed its extra cost
Suppose, purely as a worksheet scenario, the car costs $20,000 in cash but financing brings a $500 reduction. If $19,500 is financed for 60 months at 5.29%, the payment is about $370.59 and the scheduled total about $22,235.13. The $500 discount would not offset the example’s interest: the financed payment total still exceeds the $20,000 cash price by about $2,235.13.
This comparison excludes taxes and fees on both routes for clarity. In a real offer, compare the amounts after the dealer calculates them, because a changed sale price can also change tax. Do not subtract the discount again after using the lower financed price; that would count it twice.
The early payoff guide addresses a third scenario: financing for a discount and then paying early. Check the loan’s prepayment terms and the discount conditions first. Neither a penalty-free payoff nor preservation of an incentive is assumed by the full-term calculation.
Liquidity belongs beside the interest comparison
Cash keeps loan interest out of the vehicle’s purchase financing, but the remaining money matters. List near-term registration, insurance and repairs before committing every available dollar. This article does not assign a universal reserve amount because household obligations and the car’s condition differ.
A larger down payment scales the example’s loan cost down if the rate and term stay the same. Financing $15,000 rather than $20,000 at the illustrated 60-month rate would allocate 75% of its interest, about $2,103.95, because the assumed loan has no fixed fees. If the lender changes the rate or charges a fixed fee, that proportional shortcut no longer describes the offer.
Do not compare a guaranteed loan expense with an assumed investment gain as though both were certain. If a savings account is part of the comparison, use its rate, tax treatment and accessible balance for the same period, and distinguish a variable return from a fixed repayment obligation. For personal allocation decisions, qualified financial advice may help.
The 72-month example has the smallest installment and the highest interest total. Choose a repayment period using the full schedule and other ownership expenses, rather than extending the term solely to reach a target payment.
The car ownership budget keeps insurance, maintenance and fuel beside the purchase. Paying cash or financing changes the funding arrangement; it does not remove the vehicle’s continuing expenses. Return to the same out-the-door worksheet whenever an offer changes so a new discount or add-on does not invalidate the comparison.
For a vehicle already being leased, the lease buyout worksheet identifies tax and purchase charges before applying the loan calculation to that route.
Questions people ask
Is cash always cheaper than financing a used car?
At the same purchase price and without a financing incentive, cash avoids loan interest. Different sale prices or fees can change the comparison, so use both final offers.
Is 4.79% a rate every used-car buyer can get?
No. It is Navy Federal's advertised minimum for the stated term on October 8, 2026. Membership, underwriting and vehicle conditions apply; an offered APR can be higher.
Why does the 60-month loan cost more?
The example carries debt for longer and uses a higher published minimum APR. Its interest is about $2,805.26, versus $1,511.23 for the 36-month example.
Can I finance for a discount and immediately pay off the loan?
Only compare that strategy after reading the incentive and prepayment terms. A full-term loan illustration does not establish that an immediate payoff preserves the discount without penalties.
Where these figures come from
- New and Used Auto Loan Rates, October 8, 2026 Navy Federal Credit Union · navyfederal.org
- Financing or Leasing a Car Federal Trade Commission · consumer.ftc.gov
- Truth in Lending Disclosure Consumer Financial Protection Bureau · consumerfinance.gov
- Auto Loan Prepayment Penalties Consumer Financial Protection Bureau · consumerfinance.gov
Figures last checked October 2026.
