How to use the auto loan calculator
Enter the vehicle price, your down payment and the value of any car you are trading in. Add your local sales tax rate and the title, registration and dealer fees, then the interest rate and loan term in months. Choose whether to roll the tax and fees into the loan or pay them upfront, and the calculator shows your monthly payment, the amount financed, total interest and the full cost of the car.
What goes into the amount financed
The amount you borrow is the vehicle price, minus your down payment and trade-in, plus any tax and fees you choose to finance. In most US states sales tax applies only to the price after the trade-in is subtracted, which can save hundreds of dollars on a trade.
How the payment is calculated
Car loans are fixed-rate installment loans, so the payment is the same every month. It uses the standard formula 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.
Choosing a loan term
Longer terms such as 72 or 84 months lower the monthly payment but raise the total interest, and you are more likely to owe more than the car is worth for the first few years. A term of 60 months or less keeps the total cost down. Compare a few terms in the calculator to see the trade-off in dollars.
Tips for a cheaper car loan
- Get pre-approved by a bank or credit union before visiting the dealer, so you have a rate to compare.
- Put at least 10% to 20% down to reduce interest and avoid negative equity.
- Negotiate the vehicle price separately from the financing and the trade-in.
Frequently asked questions
How much car can I afford?
A common guideline is to keep the car payment under 10% to 15% of your take-home pay and total car costs, including insurance and fuel, under about 20%.
Should I pay sales tax upfront or finance it?
Paying upfront saves the interest you would pay on the tax. Financing it keeps more cash in hand but raises the total cost.
Does a trade-in reduce sales tax?
In most US states, yes. Tax is charged on the price minus the trade-in value, though a few states tax the full price.