How to use this car loan calculator
Enter the price of the car, your down payment and the interest rate (APR) you've been offered. If you're trading in a car, enter its value and any amount you still owe on it. Add your sales tax rate and the dealer's documentation, title and registration fees, then choose a loan term. The calculator assumes taxes and fees are rolled into the loan, which is how most dealers structure it.
The results show your monthly payment, the amount you're borrowing, the interest you'll pay over the life of the loan and the total cost of the car including your down payment.
The car loan payment formula
Payment = P × r ÷ (1 − (1 + r)−n)
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 the price plus tax and fees, minus the down payment and trade-in, plus anything still owed on the trade-in.
Worked example: a $35,000 car with $5,000 down and a $3,000 trade-in. Sales tax at 7% on $32,000 is $2,240, and fees are $500, so you finance $35,000 + $2,240 + $500 − $5,000 − $3,000 = $29,740. At 6.5% APR over 60 months, the payment is $581.90 a month and you pay $5,174 in interest.
How the loan term changes the cost
| Term | Monthly payment | Total interest |
|---|---|---|
| 36 months | $911.50 | $3,074 |
| 48 months | $705.28 | $4,114 |
| 60 months | $581.90 | $5,174 |
| 72 months | $499.93 | $6,255 |
| 84 months | $441.62 | $7,356 |
Same car, same $29,740 borrowed at 6.5%. Stretching from 60 to 84 months lowers the payment by about $140 but adds more than $2,000 of interest, and lenders often charge a higher rate on longer terms, which widens the gap further. Long loans also raise the risk of being "upside down": owing more than the car is worth.
Tips for a cheaper car loan
- Get pre-approved by a bank or credit union before visiting the dealer, so you can compare their offer against a real rate.
- Negotiate the price, not the payment. A low monthly figure can hide a long term or add-ons.
- Consider the 20/4/10 rule: at least 20% down, a term of no more than 4 years, and total car costs under 10% of your gross income.
- Watch trade-in tax rules. Most US states only tax the price minus your trade-in, but a few, such as California, tax the full price. Set the trade-in to 0 and add it to the down payment to model that.
- Avoid rolling negative equity from your old car into the new loan if you can; it means paying interest on a car you no longer own.
Frequently asked questions
How is a car loan payment calculated?
Lenders use the standard amortization formula: payment = 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. Each payment covers that month's interest first, and the rest reduces the balance.
What is a good interest rate for a car loan?
It depends mostly on your credit score, the loan term and whether the car is new or used. Borrowers with excellent credit get the lowest rates, while used-car loans and long terms usually cost more. Compare offers from at least two lenders, and remember that a difference of 2 percentage points on $30,000 over 5 years is worth about $1,700.
Is a 72-month car loan a bad idea?
Not always, but it is expensive. You'll pay more interest than on a shorter loan and you're more likely to owe more than the car is worth for the first few years. If a 72- or 84-month term is the only way the payment fits your budget, consider a cheaper car.
Does a trade-in reduce sales tax?
In most US states, yes: sales tax is charged on the price minus your trade-in's value. A few states, including California, charge tax on the full price. Rules differ by country, so check locally.
Results are estimates for comparison only, not a loan offer. Your actual rate, fees and taxes depend on your lender, credit and location.