Auto Loan Calculator

How an auto loan payment is built

The monthly payment on a car loan comes from four numbers: how much you finance, the interest rate, the length of the loan, and nothing else. Everything a dealer can adjust during a negotiation feeds into one of those four. That is why focusing on the monthly payment alone is risky. A payment can always be made smaller by stretching the term, even when the total cost rises sharply.

The amount financed starts with the vehicle price, adds sales tax, then subtracts your down payment and your trade in allowance. The loan is amortised using the same formula as a mortgage: the payment is the amount financed multiplied by the monthly rate, divided by one minus one plus the monthly rate raised to the negative number of months. Each payment covers that month's interest first, and the remainder reduces the balance.

How trade in value affects sales tax

This is the part most calculators get wrong and most buyers do not know. In the majority of states, sales tax is charged on the vehicle price less the trade in allowance. If you buy a 35,000 dollar car and trade in a vehicle worth 6,000 dollars in a state with a 6.25 percent rate, tax is charged on 29,000 dollars rather than 35,000. That is a saving of around 375 dollars purely from how the transaction is structured.

A minority of states do not allow the trade in credit and tax the full purchase price regardless. A few states have no general sales tax at all, and some cap the credit or apply local rates on top of the state rate. This calculator applies tax to the price less trade in because that is how most states do it. If your state is one of the exceptions, enter your vehicle price with no trade in reduction and account for the trade in as a down payment instead. Check your state revenue department, or ask the dealer to show the tax line on the purchase order.

Term length, interest and depreciation

Long terms have become normal. Seventy two and eighty four month loans lower the monthly figure and make an expensive car feel affordable. The cost is twofold. First, you pay interest for far longer, so the total interest on an 84 month loan can be double that of a 48 month loan at the same rate. Second, cars depreciate quickly in the first years while a long loan amortises slowly, so the balance stays above the resale value for a long stretch. That gap is called negative equity, or being upside down, and it becomes a real problem if you need to sell early, trade in, or if the car is written off after an accident.

Levers that actually move the number

• The interest rate. Financing arranged in advance through a bank or credit union gives you a benchmark the dealer has to beat.
• The out the door price, not the sticker price. Documentation fees, title, registration and add ons can shift the total by thousands.
• The down payment. More cash upfront reduces both interest and the time spent in negative equity.
• The term. Shortening it raises the payment and lowers the lifetime cost.

What is not included

This calculator does not model documentation fees, title and registration, extended warranties, gap insurance, dealer add ons, or manufacturer rebates and subsidised finance offers. It also ignores insurance, fuel and maintenance, which together often cost more per year than the interest does.

Use the tool to compare structures side by side, then confirm the exact figures on the purchase order before signing. Nothing here is financial advice, and a qualified professional should be consulted for decisions about borrowing. Our terms of use set out the full disclaimer.