How the auto loan calculator works
First it works out how much you need to borrow, then it applies the standard loan formula.
Amount financed = price − rebates − down payment − trade-in + still owed on trade-in (+ tax and fees, if financed)
Monthly payment = A × r × (1 + r)n ÷ ((1 + r)n − 1)
Here A is the amount financed, r is the APR ÷ 12 ÷ 100 and n is the number of months. Sales tax is charged on the price, minus the trade-in value when your state allows it. Cash rebates usually do not lower the tax, so the calculator does not subtract them before tax.
Worked example
You buy a $35,000 car with $5,000 down, 7% sales tax and $1,500 in fees, financed for 60 months at 6.5%.
- Sales tax: $35,000 × 7% = $2,450.
- Amount financed: $35,000 − $5,000 + $2,450 + $1,500 = $33,950.
- Monthly payment: about $664 for 60 months.
- Total interest: about $5,900 over the life of the loan.
Tips before you sign
- Get pre-approved by a bank or credit union so you know what rate to beat at the dealer.
- Negotiate the price, not the payment. A low payment can hide a long, expensive loan.
- Compare 0% APR deals with cash rebates. Sometimes taking the rebate and your own financing costs less.
- Read every fee on the buyer's order. Ask what each one is for.
Frequently asked questions
How is a car payment calculated?
Start with the price, subtract any rebates, your down payment and your trade-in, and add anything still owed on the trade-in. If you finance them, add sales tax and fees too. The result is the amount financed, and the monthly payment comes from the standard loan formula using your APR and term.
Does a trade-in reduce sales tax?
In most US states, yes: sales tax is charged on the price minus your trade-in value, which can save hundreds of dollars. A few states tax the full price. Untick the trade-in tax box in the calculator if your state works that way.
What happens if I owe more on my trade-in than it is worth?
That gap, called negative equity, is usually added to your new loan. You end up paying interest on a car you no longer own, so it is worth paying it down or waiting before trading in if you can.
Is a 72- or 84-month car loan a good idea?
Longer terms lower the monthly payment but cost more in interest and often carry higher rates. Cars also lose value quickly, so a long loan makes it more likely you will owe more than the car is worth. Many buyers aim for 60 months or less.
Should I add taxes and fees to the loan or pay them upfront?
Paying them upfront means borrowing less and paying less interest. Rolling them into the loan keeps more cash in your pocket today but raises the monthly payment and the total cost.
Calculations are exact for the numbers you enter. Sales tax rules, fees and incentives vary by state and dealer, and the APR you are offered depends on your credit. Check the figures on your purchase agreement before signing. This is not financial advice. Read the full disclaimer and how we check our formulas.