How to use this car loan calculator
- Vehicle price: the negotiated price of the car before tax.
- Down payment: the cash you'll pay upfront.
- Trade-in value: what the dealer is giving you for your current car, minus anything you still owe on it.
- Sales tax: your state and local rate, and whether it applies to the full price or to the price minus your trade-in.
- APR and loan term: the rate you've been quoted and the number of months.
You'll see the monthly payment, the amount you're financing, the sales tax, the total interest and the total cost of the car including interest. The amortization schedule shows how the balance falls each year.
How a car loan is calculated
A car loan is a standard fixed-rate installment loan. The calculator first works out how much you need to borrow:
The monthly payment then uses the same amortization formula as any fixed-rate loan, M = P × r ÷ (1 − (1 + r)−n), where P is the amount financed, r is the APR divided by 12 and n is the number of months.
Worked example
If your state taxed the full $35,000 instead, the tax would be $2,100, you'd finance $24,100 and the payment would rise to $477.21. That's why the "Tax applies to" setting matters: check your state's rules on trade-in tax credits.
How the loan term changes the cost
Stretching a loan over more months makes the payment look affordable, but you pay for it in interest.
| Term | Monthly payment | Total interest |
|---|---|---|
| 36 months | $729.32 | $2,635 |
| 48 months | $565.61 | $3,529 |
| 60 months | $467.70 | $4,442 |
| 72 months | $402.70 | $5,374 |
| 84 months | $356.49 | $6,325 |
Same $23,620 financed at 7% APR in every row.
Going from 60 to 84 months lowers the payment by about $111, but adds nearly $1,900 in interest, and longer loans are often offered at higher rates, which widens the gap.
There's another risk with long terms: cars lose value, often fastest in the first few years. On a long loan your balance can fall more slowly than the car's value, leaving you owing more than it's worth (sometimes called being "upside down"). That becomes a problem if you need to sell or the car is written off.
0% APR or a cash rebate?
Dealers sometimes offer a choice between 0% financing and a cash rebate. Compare the total cost of each.
Tips to get a better car loan
- Get pre-approved first. A quote from your bank or credit union gives you a rate to compare with dealer financing.
- Negotiate the price, not the payment. Focusing on the monthly payment makes it easy to end up with a longer loan instead of a better deal.
- Put more down. It reduces the amount financed and the interest, and protects you against owing more than the car is worth.
- Know your trade-in's value. Check it independently before you visit the dealer.
- Read the add-ons. Extended warranties and other products can be added to the loan, increasing both the payment and the interest.
What this calculator doesn't include
The results cover the vehicle price, sales tax and loan interest. Registration and title fees, dealer documentation fees, extended warranties, GAP insurance and car insurance are not included, and they vary by state and dealer. If you'll finance any of them, add them to the vehicle price. Always compare the result with the figures on the dealer's or lender's finance agreement.