How to use the car loan calculator
- Enter the vehicle price you negotiated, your down payment and the APR from your lender or dealer.
- Add your trade-in value and anything you still owe on it (negative equity is rolled into the new loan).
- Enter your state’s sales tax rate and typical fees for title, registration and documentation.
- Compare loan terms in the table to see how a longer loan lowers the payment but raises the interest.
How the payment is calculated
Loan amount = price + fees + sales tax − down payment − trade-in + amount still owed. The monthly payment uses the standard amortization formula: M = P × r ÷ (1 − (1 + r)−n), where P is the loan amount, r is the APR ÷ 12 and n is the number of months.
Trade-ins and sales tax
In most US states, sales tax applies only to the price after your trade-in is deducted — so a $6,000 trade-in at 6.25% tax saves you $375 in tax on top of reducing the loan. A few states, including California, tax the full purchase price. Tick the box if that applies where you live.
Choosing a loan term
| Term | Pros | Cons |
|---|---|---|
| 36–48 months | Least interest, you build equity fast | Higher monthly payment |
| 60 months | Popular balance of payment and cost | More interest than shorter terms |
| 72–84 months | Lowest monthly payment | Much more interest; easy to owe more than the car is worth |
Cars lose value quickly — often 15–25% in the first year. With a long loan and a small down payment, you can end up “upside down”, owing more than the car is worth. A common guideline is to put at least 10–20% down, finance for no more than 60 months, and keep total car costs under about 10–15% of your take-home pay (check yours with the paycheck calculator).
Ways to get a lower rate
- Check your credit score and fix errors before you shop.
- Get pre-approved by a bank or credit union, then ask the dealer to beat it.
- Compare dealer promotional APRs with cash-back rebates — sometimes the rebate plus outside financing is cheaper.
- Negotiate the vehicle price first, separately from financing and your trade-in.
Frequently asked questions
How is a car payment calculated?
The loan amount (price + tax + fees − down payment − trade-in) is spread over the term with interest using the standard amortization formula.
Is it better to take a 60 or 72-month car loan?
A 60-month loan costs less in interest and builds equity faster. A 72-month loan lowers the payment but costs more overall.
Does a trade-in reduce sales tax?
In most states, yes — tax is charged on the price minus the trade-in. A few states, such as California, tax the full price.
What happens if I owe money on my trade-in?
The amount still owed is added to your new loan. Enter it in “Still owed on trade-in”.