Auto Loan Calculator
Work out your monthly car payment with sales tax, trade-in value and fees included, so the figure you see is close to what the dealer will actually quote.
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What goes into a car payment
A car loan is simple in structure: you borrow an amount, pay a fixed rate, and repay it over a set number of months. What surprises people is the amount borrowed. It is rarely the sticker price. Sales tax is charged on the purchase and is frequently financed into the loan rather than paid separately, dealer documentation and registration fees get added on, and a trade-in reduces the balance. The figure that matters is the amount financed, not the price on the windscreen.
Term length is where car finance quietly becomes expensive. Stretching a loan from five years to seven lowers the monthly payment, which is why dealers offer it, but you pay interest for two extra years and spend longer owing more than the car is worth. A new car typically loses a substantial share of its value in the first couple of years, so a long loan can leave you in negative equity, owing more than you could sell the vehicle for.
On a 35,000 dollar car with 5,000 dollars down at 7.9 percent over five years, the payment is 606.86 dollars and the total interest is 6,411 dollars. Stretching the same loan to seven years would cut the monthly payment to 466.09 dollars but raise the total interest to 9,152 dollars. That is the trade you are making every time a longer term is offered: 141 dollars a month now, in exchange for 2,741 dollars of extra interest later.
One advantage car loans have over mortgages is that interest is usually simple and there are rarely prepayment penalties. Paying extra reduces the balance directly and shortens the loan, exactly as with a mortgage, and because car loan balances are smaller the effect is quicker to see. Even modest extra payments can remove many months.
How the payment is calculated
The amount financed is the price minus your down payment and trade-in, plus tax and fees. That figure goes into the standard amortisation formula.
| Symbol | Meaning |
|---|---|
Price |
The negotiated price of the vehicle |
Down payment |
Cash you pay up front |
Trade-in |
Value the dealer allows for your current vehicle |
Tax and fees |
Sales tax, documentation, registration and title charges |
Sales tax varies by state and locality and is charged on the purchase price, sometimes after the trade-in is deducted. Because the rules differ so much, this calculator asks for the tax amount directly rather than guessing your local rate.
Worked example: 35,000 dollar car
A 35,000 dollar vehicle with 5,000 dollars down, no trade-in, at 7.9 percent over five years.
| Figure | Result |
|---|---|
| Vehicle price | $35,000.00 |
| Down payment | $5,000.00 |
| Amount financed | $30,000 |
| Monthly payment | $606.86 |
| Interest paid in month 1 | $197.50 |
| Principal repaid in month 1 | $409.36 |
| Total interest over 5 years | $6,411.43 |
| Total of payments | $36,411.43 |
| Total cost of the car | $41,411.43 |
The car costs 41,411 dollars in total once the 5,000 dollar down payment and 6,411 dollars of interest are counted, against a negotiated price of 35,000. In the first month just under a third of the payment is interest. Paying an extra 100 dollars a month would clear the loan well over a year early and save a substantial part of that interest.
Estimates only. Your lender's figures may differ because of fees, escrow and rounding.
Paying less for the same car
Get finance approved before you shop
A pre-approved loan from a bank or credit union gives you a known rate and turns dealer financing into a comparison rather than a negotiation. Dealers make much of their margin on finance, and having your own offer removes that leverage entirely.
Negotiate the price, not the payment
Dealers can make any monthly payment look acceptable by extending the term. Agree the out-the-door price first, in writing, and arrange finance separately. A long term can hide a poor price behind a comfortable payment.
Avoid terms longer than five years
A longer term lowers the payment but extends the period during which you owe more than the car is worth. Depreciation is fastest in the first years, so negative equity is most likely early in a long loan, exactly when you are most likely to need to sell.
Consider a nearly new car
A vehicle two or three years old has absorbed the steepest part of its depreciation while still being current. Financing a smaller amount at the same rate reduces both the payment and the interest, and insurance is often cheaper.
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Frequently asked questions
How much should I put down on a car?
A common guideline is 10 to 20 percent, and a larger deposit helps you avoid negative equity if the car depreciates quickly. If you are trading in a vehicle you own outright, that value serves the same purpose and can cover the deposit entirely.
Is a longer car loan a good idea?
It lowers the monthly payment but increases total interest and keeps you in negative equity for longer. If a longer term is the only way the payment fits, the car is probably more expensive than your budget supports. Five years or less is the safer range.
Does a trade-in reduce my sales tax?
In many US states the trade-in value is deducted before sales tax is calculated, which reduces the tax you pay. Rules vary by state and some do not allow it. Because of this, the calculator asks for the tax amount directly so you can enter the correct figure for your location.
Should I take dealer financing or a bank loan?
Compare the annual percentage rate, not the monthly payment. Dealer promotional rates can be genuinely excellent, particularly on new vehicles, while standard dealer financing is often higher than a credit union would offer. Get at least one outside quote before deciding.
Can I pay off a car loan early?
Usually yes, and most car loans have no prepayment penalty. Because the balance is relatively small and the term is short, extra payments shorten the loan quickly. Confirm there is no penalty in your agreement before making a large overpayment.