This auto loan calculator estimates your monthly car payment from the vehicle price, down payment, trade-in value, sales tax, interest rate, and loan term. It also reveals the numbers dealers rarely emphasize: total interest and the true total cost of the vehicle.
In most states, sales tax applies to the vehicle price minus your trade-in, and any unpaid tax is rolled into the loan. Enter your numbers to see the amount financed, the monthly payment, and a yearly amortization table showing how the balance falls over the life of the loan.
How Car Payments Are Calculated
Auto loans use the standard amortization formula for a fixed monthly payment:
M = P × [r(1 + r)^n] / [(1 + r)^n − 1]
Where P is the amount financed, r is the monthly interest rate (APR ÷ 12), and n is the number of monthly payments.
The amount financed is: vehicle price + sales tax − down payment − trade-in value. Because tax is usually charged on the price minus trade-in, trading in a car reduces both the loan and the tax bill in most states (California and a few others tax the full price).
Each payment covers that month’s interest first; the remainder reduces the balance, so early payments are interest-heavy and later ones are principal-heavy.
Choosing a Loan Term and Rate
Longer terms lower the monthly payment but raise total interest and increase the risk of owing more than the car is worth (being “upside down”).
- 36–48 months: highest payment, least interest, fastest equity.
- 60 months: the most common term and a reasonable middle ground.
- 72–84 months: lowest payment, but you may be upside down for years since cars typically lose 15%–20% of value in year one.
- A 20% down payment plus trade-in helps offset first-year depreciation.
- Rates vary widely by credit score: as of recent data, new-car APRs run roughly 5%–7% for excellent credit and 12%+ for subprime borrowers. Getting pre-approved by a bank or credit union gives you leverage at the dealership.
Example: $35,000 Car with Trade-In
Suppose you buy a $35,000 vehicle with $5,000 down and a $3,000 trade-in, in a state with 7% sales tax, financing at 7.5% APR for 60 months.
Sales tax is 7% of $32,000 (price minus trade-in) = $2,240. The amount financed is $35,000 + $2,240 − $5,000 − $3,000 = $29,240.
The monthly payment comes to about $585.91. Over 60 payments you pay roughly $35,154 total, of which about $5,914 is interest. The true total cost of the car — price, tax, and interest combined — is approximately $43,154.
Frequently Asked Questions
What is a good interest rate for a car loan?
Rates depend on credit score, loan term, and whether the car is new or used. Borrowers with excellent credit (720+) typically see new-car APRs in the 5%–7% range, while subprime borrowers may pay 12% or more. Used-car rates run 1–3 percentage points higher than new-car rates.
How much should I put down on a car?
A common guideline is 20% down on a new car and 10% on a used car. A larger down payment lowers your monthly payment, reduces total interest, and protects you from owing more than the car is worth as it depreciates.
Does a trade-in reduce sales tax?
In most U.S. states, yes — sales tax is charged only on the vehicle price minus your trade-in value. A $3,000 trade-in at a 7% tax rate saves $210 in tax on top of reducing the loan. California, Hawaii, and a few other states tax the full price.
Is a 72- or 84-month car loan a bad idea?
Long terms lower the payment but cost significantly more in interest and keep you upside down (owing more than the car is worth) for years. If you need 72+ months to afford the payment, a less expensive vehicle is usually the better financial choice.
Should I finance through the dealer or a bank?
Get pre-approved by a bank or credit union first, then let the dealer try to beat that rate. Dealers can sometimes offer promotional APRs (like 0.9% on new cars), but they may also mark up rates. A pre-approval gives you a benchmark and negotiating power.