How to Calculate Your Car Loan Payoff Amount

When you sell a car, trade it in, refinance or simply want to be done with the loan, you need one number: the payoff amount. It is almost never the balance on your last statement, because interest keeps building every day. This guide shows how to calculate the payoff amount yourself, how per diem interest works on auto loans, and how to read the payoff quote your lender gives you.

Payoff amount vs. loan balance

• Your loan balance (or principal balance) is what you owed immediately after your last payment was applied.
• Your payoff amount is what it takes to close the loan completely on a specific day. That is the balance, plus interest accrued since your last payment, plus any fees.

Because most car loans charge simple interest daily, the payoff amount rises a little every day until you pay.

The car loan payoff formula

per diem interest = balance × annual rate ÷ 365
payoff amount = balance + per diem × days since your last payment + fees

That is it. The only inputs are the balance after your last payment, the APR, and the number of days that will have passed when your payoff arrives. The auto loan payoff calculator does this for you and also shows how extra payments change the months left.

How to calculate per diem interest

Per diem interest is the interest your loan earns the lender each day:

1. Convert the APR to a decimal: 7.5% → 0.075.
2. Multiply by the balance: 18,000 × 0.075 = 1,350 a year.
3. Divide by 365: 1,350 ÷ 365 = $3.70 a day.

Some lenders use a 360-day year, which raises the daily charge to $3.75. The day count is set in your contract. Lenders also quote the per diem on payoff letters, so you can check it against your own calculation.

Worked example: a payoff quote, step by step

You owe $18,000 after your last payment, at 7.5% APR. It has been 12 days since that payment, and you want to pay the loan off.

1. Per diem: 18,000 × 0.075 ÷ 365 = $3.70 a day.
2. Interest since the last payment: 3.70 × 12 = $44.38.
3. Payoff amount today: 18,000 + 44.38 = $18,044.38.

Now the lender gives you a 10-day payoff quote, valid until the 22nd day after your last payment. They add 10 more days of interest: 18,000 + 3.70 × 22 = $18,081.37. If your payment arrives sooner, you overpay slightly, and the lender refunds the difference.

What if you don’t know your balance?

You can estimate it from the original loan with the remaining-balance formula:

balance after k payments = P × (1 + r)^k − payment × ((1 + r)^k − 1) ÷ r

P is the amount borrowed, r is the monthly rate and k is the number of payments made. For a $25,000 loan at 6.5% over 60 months, the payment is $489.15. After 20 payments, the balance is about $17,549.10, and the per diem is about $3.13. An amortization calculator shows the balance after every payment.

This is an estimate. Late payments, extra payments and fees all change the real balance, so use the lender’s figure for the final payment.

How to read a payoff letter

A lender’s payoff quote or letter usually includes:

• Payoff amount: the total to send, valid through a specific date.
• Good-through date: the last day the amount is valid. After it, more per diem interest is owed.
• Per diem: the daily interest, so you can adjust the figure if your payment will arrive on a different day.
• Payment instructions: a mailing address, wire details or online option. Payoffs often go to a different address than regular payments.
• Fees: any payoff, processing or lien-release fee.
• Lienholder details: the name that appears on your title, needed if a dealer or buyer pays the lender directly.

Check the balance and per diem against your own calculation. If they don’t match, ask the lender to explain the difference before you pay.

Selling or trading in with negative equity

If you sell or trade in your car, the payoff amount is compared with what the car is worth:

• Positive equity: the car is worth more than the payoff. The dealer or buyer pays the lender, and you keep or apply the difference.
• Negative equity: you owe more than the car is worth. With a 10-day payoff of $18,081.37 and a trade-in offer of $15,000, you are $3,081.37 “upside down”. You either pay that difference in cash or roll it into the next loan, which raises the new balance and its interest.

Rolling negative equity into a new loan is how many buyers end up owing more than their next car is worth too. Paying it off, or keeping the current car longer, usually costs less.

Simple interest, precomputed interest and the Rule of 78s

• Simple interest loans (most car loans today) charge interest only on the balance and only for the days that pass. Paying early saves interest, and the payoff formula above applies.
• Precomputed interest loans add the full interest to the loan at the start. When you pay off early, the lender refunds unearned interest using a formula, sometimes the Rule of 78s, which front-loads the interest. You save less by paying early, so check your contract.

Common mistakes

• Paying the statement balance. It leaves the accrued interest unpaid. A small balance stays open and can be reported late.
• Using an old payoff quote. Quotes expire. After the good-through date, more interest is owed.
• Forgetting fees. Some lenders add a payoff, lien release or processing fee.
• Not stopping automatic payments. Cancel autopay after the payoff clears, or ask for a refund if an extra payment goes through.
• Assuming the title arrives automatically. Follow up until you have the title or an electronic lien release.

When you need a payoff amount

• Selling a car privately or trading it in, where the buyer or dealer pays the lender directly.
• Refinancing, where the new lender pays off the old loan. Compare offers with the car loan calculator.
• Paying the loan off early with savings. See the loan payoff calculator to compare paying in full with paying extra each month.

Get the exact figure from your lender for the final payment, and use the formula here to check it and to plan ahead.

Frequently asked questions

What is per diem interest on a car loan?

Per diem means "per day". It is the interest your loan adds each day, calculated as the balance × the annual rate ÷ 365. On an $18,000 balance at 7.5%, per diem interest is about $3.70 a day.

Why is my payoff amount different from my balance?

Your balance is what you owed right after your last payment. The payoff amount adds the interest that has built up since then, plus any fees, up to the date the lender receives your money.

What is a 10-day payoff?

It is a payoff quote that stays valid for 10 days. The lender adds 10 days of per diem interest to today's figure so that a check or transfer still clears the loan in full when it arrives. If it arrives early, the lender refunds the difference.

Do all lenders use 365 days?

Most US auto lenders divide by 365. A few use 360, which makes the daily charge slightly higher. On $18,000 at 7.5%, that is $3.75 a day instead of $3.70. The day count is in your contract.

How do I get an official payoff amount?

Ask your lender for a payoff quote online, in the app or by phone. It shows the payoff amount, the per diem and the date the quote is good through. Use that figure for the final payment, not your statement balance.