How is a car loan payment calculated?

First find the amount financed: vehicle price plus any financed sales tax and fees, minus your down payment and trade-in value. Then apply the standard loan payment formula M = P · r / (1 − (1 + r)^−n), where P is the amount financed, r is the monthly rate (APR ÷ 12), and n is the number of monthly payments. The result is your fixed monthly payment.

Is a longer car loan term cheaper?

A longer term lowers the monthly payment but raises the total interest you pay, because you owe the balance for more months. A 72- or 84-month loan also increases the risk of being 'underwater' — owing more than the car is worth — since cars depreciate faster than long loans pay down. The term comparison table shows the trade-off for your numbers.

How much should I put down on a car?

A common guideline is about 20% down on a new car and 10% on a used car, which reduces the amount financed, lowers your payment and interest, and limits the chance of going underwater. Any down payment or trade-in helps; the calculator updates instantly so you can see the effect of different amounts.

Does this calculator include sales tax?

Optionally. Enter your sales-tax rate and it is added to the amount financed. Sales-tax rules vary widely by US state — some tax the full price, some tax the price after trade-in, and some have no vehicle sales tax. This tool is a math estimate, not tax advice; confirm your state's rules and dealer fees before signing.

Auto Loan Calculator: Car Payment & Interest

How a car loan payment is built

Your monthly payment starts with the amount financed, not the sticker price. The calculator works it out as: vehicle price, plus any financed sales tax and fees, minus your down payment and trade-in value. That net figure is the loan principal.

From there it uses the standard fixed-rate loan formula M = P · r / (1 − (1 + r)^−n), where P is the amount financed, r is the monthly rate (APR ÷ 12), and n is the term in months. The payment stays the same every month; early payments are more interest, later ones more principal — exactly the pattern you can see in the amortization schedule calculator.

Amount financed = price + tax − down payment − trade-in. A $35,000 car with $3,500 down and no trade-in finances $31,500. At 7.5% over 60 months that's about $631/month and roughly $6,400 in interest.

Why a longer term costs more

Dealers often quote the lowest possible monthly payment, which usually means stretching the loan to 72 or 84 months. That lowers the monthly number, but you pay interest for more years, so the total cost rises. The comparison table above shows the same car at 36 to 84 months side by side — the monthly payment falls while total interest climbs.

There's a second risk with long terms: going underwater. Cars depreciate fastest in the first few years, but an 84-month loan pays principal down slowly. For a stretch of the loan you can owe more than the car is worth, which is a problem if you total it or want to sell. A shorter term and a larger down payment both reduce that risk.

Down payment and trade-in

Both a cash down payment and a trade-in reduce the amount you finance, which lowers both your monthly payment and the total interest. A common guideline is roughly 20% down on a new car and 10% on a used car. Beyond the math, a bigger down payment keeps you from going underwater and can sometimes qualify you for a better rate.

If you have cash beyond a sensible down payment, it's worth comparing: paying more down saves you the loan's interest rate, guaranteed. Investing that money instead might earn more over time but carries risk — run the numbers in the compound interest calculator to compare the two paths with real figures.

Getting a lower APR

The APR is the single biggest lever on total interest. A few practical, non-advice points that show up consistently in US auto lending:

Credit score drives the rate more than anything else; borrowers with strong credit often pay several points less than those with fair credit.
New vs used: used-car loans typically carry higher rates than new-car loans, partly offsetting the lower price.
Get pre-approved at a bank or credit union before visiting the dealer, then let the dealer try to beat it — financing is negotiable.
Shorter terms sometimes come with lower rates as well as less total interest.
0% promotions are real but usually require top-tier credit and may replace a cash rebate — compare the rebate-plus-loan path against the 0% path.

Drop different APRs into the calculator with the preset chips to see how many dollars each point of rate is worth on your loan.

Sales tax and fees

Sales tax can be a large line item and the rules vary widely by US state. Some states tax the full purchase price, some tax the price after subtracting your trade-in, and a few have no vehicle sales tax at all. There are also documentation, title, and registration fees that differ by state and dealer. This calculator adds an optional sales-tax percentage to the amount financed so you can estimate the impact, but it is a math tool, not tax advice — confirm your state's rules and the exact dealer fees on the contract.

Frequently asked questions about car loans

How is my car payment calculated?

From the amount financed — price plus financed tax and fees, minus down payment and trade-in — using M = P · r / (1 − (1 + r)^−n), where r is the monthly rate (APR ÷ 12) and n is the term in months. The calculator above does it instantly.

Is a 72- or 84-month car loan a bad idea?

Not automatically, but it costs more interest and increases the time you may be underwater on the car. If a long term is the only way to afford the payment, that's often a sign to look at a cheaper car or a bigger down payment. Compare terms in the table above.

How much should I put down?

A common guideline is about 20% down on a new car and 10% on a used car. More down means a lower payment, less interest, and less chance of owing more than the car is worth.

Should I finance the sales tax?

You can, but financing tax means paying interest on it. If you can pay tax and fees in cash up front, you reduce the amount financed and the total interest. Enter your tax rate above to see the difference. This is a math estimate, not tax advice.

Does the site store my numbers?

No. All math runs in your browser and nothing is sent to a server. The "copy shareable link" button only encodes your inputs into the URL so you can save or share a scenario.

Sources & methodology. Loan payment: standard present-value-of-an-annuity formula, equivalent to Excel PMT(). Amount financed = price + financed tax/fees − down payment − trade-in; interest accrues monthly on the balance. Down-payment guidelines (≈20% new / 10% used) and underwater/depreciation cautions are widely cited consumer-finance norms. Sales-tax treatment varies by US state. Typical APRs are illustrative 2026 figures that change with credit and market conditions. Educational use only; not financial, lending, or tax advice.

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How loan term changes the cost