Simple interest car loans and daily interest
Most auto loans charge interest by the day on what you still owe. Knowing that changes how you time payments and how much paying early saves.
Updated October 30, 2026. Examples are calculated with the formulas shown on our formula page.
The daily interest formula
Daily interest = balance × APR ÷ 365
On a $30,000 loan at 6.5% for 72 months, the payment is about $504.30 and total interest about $6,309. At the start, interest accrues at roughly $5.34 a day.
Why the timing of your payment matters
Your payment first covers the interest that built up since the last payment. If 35 days pass instead of 30, five extra days of interest come out of that payment, leaving less for principal. Over a loan, consistently paying a few days late can add up to a noticeable sum; consistently paying a few days early does the reverse.
Ways to pay less interest
- Add a fixed extra amount each month and ask the lender to apply it to principal.
- Make an extra payment when you get a bonus or tax refund.
- Refinance if rates or your credit have improved since you bought the car.
- Avoid “payment holidays” or deferrals unless necessary: interest keeps accruing.
See exactly what an extra payment saves with the calculator.