How to use the auto loan calculator
- Enter the vehicle price you negotiated (before tax).
- Add your down payment and any trade-in value. If you still owe money on the trade-in, enter that too — it gets rolled into the new loan.
- Enter the APR and choose a loan term.
- Add your local sales tax rate and any title, registration or dealer fees.
- See your monthly payment, total interest and the total cost of buying the car.
How car payments are calculated
First the calculator works out the amount financed:
Then it applies the standard loan formula to get the monthly payment, where r is the monthly rate and n is the number of months:
Sales tax is applied to the price minus the trade-in, which is how most U.S. states handle it. A few states tax the full price — check your state's rules.
Example
A $35,000 car with $5,000 down and 7% sales tax ($2,450) means financing $32,450. At 6.5% APR for 60 months, the payment is about $634.92 and total interest is about $5,645. Stretching to 72 months lowers the payment to about $545.48, but interest rises to roughly $6,825.
How long should a car loan be?
Longer loans (72–84 months) make monthly payments smaller, but you pay more interest and risk owing more than the car is worth as it depreciates. Many financial planners suggest the 20/4/10 guideline: put at least 20% down, finance for no more than 4 years, and keep total car costs under 10% of your gross income.
Tips for a cheaper car loan
- Get preapproved by a bank or credit union before visiting the dealer, so you have a rate to beat.
- Negotiate the price first, then discuss financing — not the monthly payment.
- Compare the total cost, not just the payment, across different terms.
- Watch for add-ons like extended warranties and gap insurance that increase the amount financed.
Frequently asked questions
How is a monthly car payment calculated?
Add the price, sales tax and fees, subtract your down payment and trade-in, then apply the loan formula Payment = P × r / (1 − (1 + r)^−n) using the monthly interest rate r and number of months n.
Is sales tax included in a car loan?
Often yes. Many buyers roll sales tax and fees into the loan, which this calculator assumes. You can also pay them upfront by increasing your down payment.
What is a good APR for a car loan?
It depends on your credit score, the loan term and whether the car is new or used. Borrowers with excellent credit typically get the lowest rates, while used-car and subprime loans carry higher APRs. Compare several lenders to find your best rate.
Should I choose a 60-month or 72-month car loan?
A 60-month loan has higher payments but less total interest and builds equity faster. A 72-month loan is more affordable monthly but costs more overall and increases the risk of owing more than the car is worth.
What does negative equity on a trade-in mean?
Negative equity means you owe more on your current car than it is worth. The difference is usually added to your new loan, which raises your payment. Enter it in the "amount owed on trade-in" field to include it.
Results are estimates for educational purposes and are not financial advice. Actual loan terms, rates, taxes and fees vary by lender and location — confirm figures with a qualified professional before making decisions.
Last updated: