How your car payment is calculated
- Sales tax = (price − trade-in value) × tax rate.
- Amount financed = price + sales tax + fees − down payment − trade-in value + amount still owed on the trade-in.
- Monthly payment uses the standard amortization formula on the amount financed.
Tips to get a better auto loan
- Get pre-approved by a bank or credit union before visiting the dealer. It gives you a rate to beat.
- Negotiate the price, not the payment. A dealer can hit any monthly payment by extending the term.
- Watch add-ons. Extended warranties, GAP insurance and paint protection add to the amount financed; add them to “fees” to see their true monthly cost.
- Keep the term short. Cars depreciate quickly — a shorter loan helps you build equity faster.
Planning a different type of loan? Try the general loan calculator, or check your overall borrowing with the debt-to-income calculator.
How to use the calculator
- Enter the vehicle price, your down payment and any trade-in value (and amount still owed on the trade-in, if any).
- Enter your state or local sales tax rate and fees such as title, registration and documentation.
- Enter the APR you have been offered and the loan term in months.
- Read the amount financed, monthly payment, total interest and total cost.
How the loan term changes the cost
| Term ($24,490 at 6.9%) | Monthly payment | Total interest | Total paid |
|---|---|---|---|
| 36 months | $755.06 | $2,692 | $27,182 |
| 48 months | $585.31 | $3,605 | $28,095 |
| 60 months | $483.78 | $4,537 | $29,027 |
| 72 months | $416.36 | $5,488 | $29,978 |
| 84 months | $368.42 | $6,458 | $30,948 |
Stretching the loan lowers the monthly payment but increases total interest, and lenders usually charge higher rates for longer terms, which widens the gap further.
The 20/4/10 guideline
A popular rule of thumb for affordable car buying is to put at least 20% down, finance for no more than 4 years, and keep total car costs — payment, insurance and fuel — under 10% of gross income. Many buyers can’t meet all three, but the further you stray, the greater the risk of being “upside down” (owing more than the car is worth), since new cars typically lose a large share of their value in the first few years.
Sales tax and trade-ins
In most U.S. states, the trade-in value is subtracted from the price before sales tax is calculated, which saves tax. A few states tax the full price regardless of the trade-in. Rebates may or may not reduce the taxable amount depending on the state. The calculator applies tax after subtracting the trade-in; adjust if your state differs.
Dealer financing vs. bank or credit union
- Get pre-approved by a bank or credit union before visiting the dealer. It gives you a rate to beat.
- Dealer financing can be cheaper when manufacturers offer promotional rates (sometimes 0–2.9%), but those deals may replace cash rebates — compare both.
- Negotiate the price first, then discuss financing and trade-in separately. Focusing only on the monthly payment makes it easy to hide a higher price or longer term.
- Watch add-ons: extended warranties, GAP insurance and protection packages rolled into the loan accrue interest too. Buy only what you need, and compare prices from outside providers.