How this car loan calculator works
Car financing has more moving parts than a plain personal loan. The sticker price is only the start: sales tax is added, dealer and registration fees may be rolled in, and your down payment and trade-in are taken off before the lender works out what you actually borrow. This calculator follows that same sequence, so the amount financed and the monthly payment match what appears on a dealer's buyer's order.
At a glance
- Amount financed = price + tax + fees, minus down payment and trade-in equity.
- Most US states charge sales tax on the price after the trade-in credit; toggle this off where they do not.
- Affordability mode works backwards from a monthly budget to a maximum sticker price.
- Terms beyond 72 months lower the payment but raise total interest and the risk of owing more than the car is worth.
There are two ways to use it. In Monthly payment mode you enter the car you are looking at and see what it costs each month. In How much car mode you enter the payment your budget allows and the calculator works backwards to the most expensive car that fits.
From sticker price to amount financed
Loan = price + sales tax + fees − down payment − trade equity Payment = Loan × r ÷ (1 − (1 + r)^−n)
The second line is the standard amortisation formula, with r the monthly rate (APR ÷ 12) and n the number of monthly payments. Interest is charged each month on the remaining balance, so early payments are mostly interest and later ones mostly principal, the yearly table under the results shows the balance falling.
Worked example: the default deal
$35,000 car, $5,000 down, $3,000 trade-in with nothing owed on it, 7% sales tax charged after the trade-in credit, 6.5% APR over 60 months.
Taxable amount: 35,000 − 3,000 = $32,000. Sales tax: 7% × 32,000 = $2,240.
Loan: 35,000 + 2,240 − 5,000 − 3,000 = $29,240.
Monthly rate 6.5% ÷ 12 = 0.54167%. Payment = 29,240 × 0.0054167 ÷ (1 − 1.0054167−60) = $572.11.
Total interest over five years is about $5,087, and the total cost of the car, cash, trade equity and every payment, is roughly $42,300.
Working backwards from a budget
Affordability mode inverts the formula. The present value of your monthly budget over the term gives the largest loan you can support; adding back the down payment and trade-in equity, then removing tax and fees, gives the maximum price.
Worked example: a $500 budget
You can pay $500 a month for 60 months at 6.5%, with $5,000 down, no trade-in and 7% tax.
The largest loan $500 a month supports is $25,554.34 (the present value of 60 payments of $500 at 0.54167% a month).
That loan plus the $5,000 down payment must cover the price plus 7% tax: 30,554.34 ÷ 1.07 = $28,555. Any car up to that sticker price fits the budget.
Trade-ins, negative equity and tax rules
A trade-in reduces the loan by its equity, what the car is worth minus what you still owe on it. If you owe more than the car is worth, the shortfall is negative equity and it is added to the new loan; the calculator warns you when that happens, because you end up financing more than the new car costs.
Whether the trade-in also reduces sales tax depends on where you live. Most US states tax the price after the trade-in credit, which is the default here. California, Virginia, Hawaii, Kentucky, Maryland and a few others tax the full price; switch the toggle off to model those. Outside the US, tax treatment varies, check the local rule and set the rate accordingly, or set tax to zero and enter the total price.
Choosing the term
The term buttons make the trade-off visible. Stretching the default loan from 60 to 84 months drops the payment from $572 to about $434, but total interest climbs from roughly $5,100 to about $7,200, and for the first few years you would owe more than the car is worth because cars lose value faster than a long loan repays. Lenders often charge higher rates beyond 72 months as well. The calculator flags terms over 72 months for these reasons.
| Term | Monthly payment | Total interest ($29,240 at 6.5%) |
|---|---|---|
| 36 months | $896.18 | $3,022 |
| 48 months | $693.43 | $4,044 |
| 60 months | $572.11 | $5,087 |
| 72 months | $491.52 | $6,150 |
| 84 months | $434.20 | $7,232 |
Rates make an even bigger difference. Manufacturer 0% promotions are genuinely interest-free, the calculator shows a straight-line payment, but they usually come instead of a cash rebate. If a rebate is on offer, run the loan at your bank's rate with the price reduced by the rebate and compare total cost.
What the calculator does not include
- Insurance, warranties and GAP cover. Separate costs unless the dealer finances them; if so, add them to fees.
- Depreciation. The total cost figure counts what you pay, not what the car will be worth afterwards.
- Variable rates or balloon payments. The loan is a plain fixed-rate amortising loan.
- Rebates. Reduce the price manually to model a manufacturer rebate.
Using the result
Set the payment against your monthly budget, then look at total interest and total cost before choosing a term. If you are comparing dealer financing with a bank or credit-union pre-approval, enter each APR with the same price and term; the difference in total interest is what the dealer's rate really costs.