About the Car Loan Calculator
The Car Loan Calculator answers the question dealers hope you'll skip: not "what's the monthly payment?" but "what will this car actually cost me?" Enter the vehicle price, your down payment and trade-in, your state's sales tax, and the loan's APR and term. You'll see the amount financed — the real size of your loan after tax is added and your cash and trade-in are subtracted — plus the monthly payment, total interest, and the vehicle's all-in cost.
That framing matters because monthly payment is the easiest number to manipulate. Stretching a loan from 60 to 84 months makes almost any car "affordable" by the month while quietly adding thousands in interest. Seeing the total cost next to the payment keeps the trade-off honest. Buying isn't your only option, either — compare the same car against leasing with the Auto Lease Calculator.
Formula Used
The amount financed comes first:
Amount financed = price + sales tax − down payment − trade-in
Sales tax is calculated on the price minus your trade-in in most states, or on the full price in states without a trade-in credit — the dropdown lets you match your state. The payment then uses the standard amortization formula:
M = P × [r(1+r)ⁿ] / [(1+r)ⁿ − 1]
Where:
M = monthly payment
P = amount financed
r = monthly interest rate (APR ÷ 12 ÷ 100)
n = loan term in months
Worked Example
Say you're buying a $35,000 vehicle with $5,000 down and a $3,000 trade-in, in a state that taxes the price minus trade-in at 6%. You qualify for 7% APR over 60 months:
Sales tax = ($35,000 − $3,000) × 6% = $1,920.00
Amount financed = $35,000 + $1,920 − $5,000 − $3,000 = $28,920.00
Monthly payment = $572.65
Total interest over 60 payments = $5,439.04
Total cost of the vehicle = $35,000 + $1,920 + $5,439.04 = $42,359.04
The sticker said $35,000 — but after tax and financing, this car costs about $7,359 more than its price. That gap is exactly what a bigger down payment, a shorter term, or a lower APR shrinks.
How the Term Changes What You Pay
Same $28,920 financed at 7% APR, at the common auto loan terms:
| Term | Monthly Payment | Total Interest |
|---|
| 36 months | $892.97 | $3,226.76 |
| 48 months | $692.53 | $4,321.22 |
| 60 months | $572.65 | $5,439.04 |
| 72 months | $493.06 | $6,580.12 |
| 84 months | $436.48 | $7,744.35 |
Going from 36 to 84 months cuts the payment roughly in half — and multiplies the interest by 2.4×. Longer terms also keep you upside down (owing more than the car is worth) for years, because depreciation outruns your slow early principal payments.
Tips Before You Sign
- Get pre-approved before the dealership. A bank or credit union pre-approval sets a real benchmark; dealer financing can carry a rate markup, and dealers will often beat your pre-approval to win the loan.
- Negotiate the price, not the payment. "What monthly payment are you looking for?" is how an extra 24 months slips into the term. Settle the out-the-door price first, then the financing.
- Use the 20/4/10 rule as a sanity check. 20% down, 48 months or less, and all vehicle costs under 10% of gross monthly income. Check the payment against your actual cash flow with the Budget Calculator.
- Watch your DTI if a mortgage is in your future. A $573 car payment is a big line in your debt-to-income ratio — see the impact with the Debt-to-Income Ratio Calculator.
- Price the tax before you shop. Sales tax on a car is often the largest single fee at signing. The Sales Tax Calculator works for any purchase; this one applies your state's trade-in rule automatically.
- Skip payment-packing add-ons. Extended warranties, paint protection, and accessories financed into the loan accrue interest for the full term. If you want them, price them separately.
New vs. Used, and the Rate You'll Really Get
Auto loan APRs vary widely with credit score, vehicle age, and lender. New-car loans typically price 1-3 percentage points below used-car loans, and borrowers with excellent credit can see rates several points below the averages while subprime borrowers may pay well into the double digits. Because the rate compounds over years, a 3-point difference on the example loan above is roughly $2,500 of interest. It's worth pulling your credit and rate-shopping (multiple auto loan inquiries within a short window count as one for scoring purposes) before you fall in love with a specific car. For a generic amortization view of any fixed loan — personal, motorcycle, RV — the Loan Calculator uses the same math without the vehicle-specific fields.
Disclaimer
This tool provides general estimates for informational purposes only and is not financial advice. It assumes a fixed APR and equal monthly payments, and excludes registration, title, documentation, and other fees, which vary by state and dealer; your lender's disclosures govern. Sales tax rules differ by state — confirm your state's trade-in treatment and combined state/local rate.
Frequently Asked Questions
How is a car loan monthly payment calculated?Car loans use the standard fixed-payment amortization formula: M = P × [r(1+r)ⁿ] / [(1+r)ⁿ − 1], where P is the amount financed, r is the monthly rate (APR ÷ 12), and n is the number of monthly payments. The amount financed is the vehicle price plus sales tax, minus your down payment and trade-in value. For example, financing $28,920 at 7% APR over 60 months costs $572.65 per month.
Does a trade-in reduce the sales tax on a car?In most U.S. states, yes — sales tax is charged on the price minus your trade-in value, so a $3,000 trade-in at a 6% rate saves $180 in tax on top of shrinking the loan. A handful of states (including California, Hawaii, Kentucky, Michigan, Montana, and Virginia) tax the full price with no trade-in credit. The calculator lets you pick either treatment so the tax line matches your state.
What loan term should I choose for a car?Shorter is cheaper, longer is easier on the monthly budget. On a $28,920 loan at 7% APR, a 48-month term costs $692.53 a month and about $4,321 in interest, while an 84-month term drops the payment to $436.48 but nearly doubles the interest to about $7,744. A common guideline is to keep car loans at 60 months or less — if you need 72-84 months to afford the payment, the car is probably too expensive for your budget.
What is the 20/4/10 rule for buying a car?It's a budgeting guideline: put at least 20% down, finance for no more than 4 years (48 months), and keep total vehicle costs — payment, insurance, and fuel — under 10% of your gross monthly income. Few buyers hit all three, but the closer you get, the less likely you are to end up upside down on the loan or squeezed by the payment.
What's the difference between APR and the interest rate?The interest rate is the cost of borrowing the principal; APR (annual percentage rate) also folds in mandatory lender fees, so it's the more complete number for comparing offers. For most auto loans with few fees the two are close. Enter the APR from your loan offer in this calculator — that's the rate that determines your actual payment.
Should I take the dealer's 0% financing or the cash rebate?Run both and compare total cost. 0% financing means every dollar of your payment goes to principal — but it usually replaces a rebate. If the choice is 0% APR or a $2,500 rebate with outside financing at 6%, calculate the total interest you'd pay on the reduced (post-rebate) balance; if it's less than $2,500, take the rebate and the outside loan. On smaller loans and shorter terms, the rebate very often wins.
Is it better to finance through the dealer or a bank or credit union?Get pre-approved at a bank or credit union before you visit the dealership. Dealers arrange financing through lenders and may add a markup to the rate they offer you; a pre-approval gives you a real benchmark, and dealers will often beat it to keep the financing in-house. Credit unions in particular tend to post some of the lowest used-car rates. Either way, negotiate the vehicle price first and the financing second.
What does it mean to be upside down on a car loan?You're upside down (or underwater) when you owe more than the car is worth — common with small down payments and long terms, because cars depreciate fastest in the first years while early payments are mostly interest. It's risky: if the car is totaled or you need to sell, you must pay the gap out of pocket. A bigger down payment, a shorter term, or gap insurance are the standard defenses.