How is a car payment calculated?

Car payment uses the financed amount (vehicle price plus tax minus down payment minus trade-in), the annual percentage rate converted to a monthly rate, and the loan term in months in the standard amortization formula M = P * [r(1+r)^n] / [(1+r)^n - 1].

Does sales tax affect auto financing?

Yes. When sales tax is added to the vehicle price and financed, both your principal loan amount and monthly payment increase. For a $35,000 car at 7% tax, the taxed price is $37,450, adding roughly $40 to your monthly payment over 60 months.

What is an amortization schedule?

An amortization schedule is a month-by-month table that shows how each payment splits between interest and principal, and how the remaining loan balance declines over time. Early payments are interest-heavy; later payments go mostly to principal.

Should I get a 60-month or 72-month auto loan?

A 60-month loan has higher monthly payments but significantly less total interest than a 72-month loan. For a $30,000 loan at 6.5% APR, the 72-month term costs roughly $1,500 more in interest. Choose 60 months if you can afford the payment; use 72 months only when the lower payment is essential for your budget.

How does a larger down payment help?

A larger down payment reduces the loan principal, which lowers both your monthly payment and the total interest paid over the life of the loan. It also reduces the risk of being underwater (owing more than the car is worth) if the vehicle depreciates faster than expected.

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Auto Loan Calculator

Project monthly payment, total interest, and full auto financing cost.

Loan Inputs

Vehicle PriceDown PaymentLoan Term (Months)Interest Rate (%)Sales Tax (%)Trade-In Value

Loan Summary

Calculate and unlock your payment and amortization details.

Home / Finance / Auto Loan Calculator · Last updated June 4, 2026 · Expert reviewed

How to use the auto loan calculator

Start by entering the vehicle’s sticker price — including any dealer add-ons you plan to finance. Add the amount you are putting down in cash, plus the value of any trade-in vehicle. The calculator subtracts your down payment and trade-in from the (tax-inclusive) vehicle price to arrive at the principal loan amount. Then set the annual interest rate (APR) your lender has quoted and choose a loan term in months — 36, 48, 60, 72, or even 84.

Once you click Calculate, you’ll see your estimated monthly payment, the total interest paid over the full term, and the total cost of the loan. The amortization table breaks down every single payment: how much goes to principal reduction versus interest, and the remaining balance after each month. Use this table to see how quickly (or slowly) you build equity in the vehicle.

To compare scenarios — for example, a 48-month term at 5.9% APR versus a 72-month term at 6.7% APR — simply adjust the inputs and recalculate. Seeing the side-by-side difference in total interest can help you decide whether a lower monthly payment is worth the extra long-term cost. You can also test the impact of a larger down payment: adding $2,000 more upfront reduces the principal, which lowers both the monthly payment and the lifetime interest.

Detailed worked example

Imagine you are buying a 2025 mid-size SUV priced at $42,000. You plan to put $6,000 down and your current car is worth $3,500 as a trade-in. Your local credit union offers 6.5% APR for 60 months, and your state charges 7% sales tax on vehicle purchases.

Here is how the numbers break down:
Taxed vehicle price: $42,000 × 1.07 = $44,940
Down payment: −$6,000 Trade-in: −$3,500
Financed amount: $35,440
Monthly payment (60 mo @ 6.5%): ~$694
Total interest over 60 months: ~$6,180
Total cost of the loan: ~$41,620

Now consider the same vehicle with a 72-month term at 6.9% APR (typical rate increase for extended terms). The monthly payment drops to about $603, but total interest balloons to roughly $7,940. The longer term costs you an extra $1,760 in interest — money you could have invested or saved. If your budget allows $694 per month, the 60-month option is the financially smarter choice. Use the calculator to run your own numbers before visiting the dealership.

Common mistakes to avoid

Focusing only on monthly payment: Dealers love to ask "what monthly payment can you afford?" This obscures the total cost. Always negotiate the out-the-door price first, then use the calculator to find a payment that fits your budget.
Ignoring the APR in favor of the rate: Some ads show low rates but add fees. APR includes everything — interest rate plus origination fees, documentation fees, and any lender charges. Always compare APRs, not teaser rates.
Rolling negative equity into a new loan: If you owe more than your current car is worth, adding that deficit to a new loan means you pay interest on old debt for years. Try to pay down negative equity before trading in.
Forgetting insurance costs: A financed vehicle requires full-coverage insurance, which can add $100–$300 per month depending on your driving record, age, and location. Factor this into your total monthly transportation cost.
Skipping a pre-purchase inspection: For used cars, a mechanic’s inspection ($100–$150) can reveal costly hidden problems that affect your loan decision.

Key terminology

APRAnnual Percentage Rate — the total yearly cost of borrowing including fees, not just the interest rate.

Loan-to-value (LTV)The ratio of the loan amount to the vehicle’s market value. A lower LTV usually qualifies for better rates.

Negative equityOwing more on the loan than the vehicle is currently worth. Common with long terms and high depreciation.

DepreciationThe rate at which a vehicle loses value — typically 15–20% per year. New cars depreciate fastest in the first three years.

Prepayment penaltyA fee some lenders charge if you pay off the loan early. Rare but worth checking your contract before signing.

Origination feeAn upfront charge the lender deducts from the loan proceeds. Usually 1–2% of the loan amount.

Methodology and sources

This calculator uses the standard amortization formula: M = P × [r(1+r)^n] / [(1+r)^n − 1], where P is the principal (vehicle price plus sales tax minus down payment and trade-in), r is the monthly interest rate (APR / 12), and n is the total number of monthly payments. Sales tax, registration fees, and dealer documentation charges are not included automatically — adjust the vehicle price upward to account for them for the most accurate estimate.

Frequently asked questions

What is a good APR for a car loan right now?

As of mid-2026, borrowers with excellent credit (720+) can expect 4.5–6.5% APR on new cars and 6–9% on used cars. Good credit (680–719) typically sees 6–10% for new and 8–13% for used. Credit unions and online lenders often beat dealer financing by 1–2 percentage points. Always get pre-approved before visiting the lot so you have leverage to negotiate.

How much should I put down on a car?

Financial experts recommend at least 20% down on a new car and 10% on a used car. A larger down payment reduces the principal, lowers monthly payments, cuts total interest, and helps you avoid being underwater (owing more than the vehicle is worth) during the first year of ownership. For a $40,000 car, 20% is $8,000 — which saves roughly $1,500 in interest over a 60-month loan compared to putting nothing down.

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

Extended-term loans (72–84 months) lower your monthly payment but come with significant trade-offs. You pay substantially more total interest, you remain in negative equity longer (making it harder to trade in or sell), and the car’s warranty may expire before the loan is paid off. As a rule of thumb, if you cannot afford a 60-month term, the vehicle may be too expensive for your budget. Reserve 72-month terms for special low-rate promotions or when the lower payment is strictly necessary for your cash flow.

Can I refinance my auto loan later?

Yes. If your credit score has improved since you took out the original loan, or if market interest rates have dropped, refinancing can reduce your APR and save hundreds or thousands of dollars. You can use this calculator to model a refinance: enter your current loan balance as the vehicle price, set down payment and trade-in to $0, and input the new rate and remaining term. Compare the total interest to your current loan — if the savings outweigh any refinancing fees, it is worth doing.

How does a trade-in affect my auto loan?

A trade-in reduces the amount you need to finance dollar-for-dollar. If your trade-in is worth $5,000 and you owe $3,000 on it, that’s $2,000 in positive equity applied to the new loan. If you owe more than it’s worth (negative equity), the difference gets added to the new loan balance — increasing both your payment and total interest. Check your trade-in’s value on Kelley Blue Book or Edmunds before visiting the dealer so you walk in with a fair number.