How the calculator works it out
First it works out how much you are borrowing: the price, plus tax and fees if you add them to the loan, minus your down payment and trade-in. Then it applies the standard fixed-rate loan formula that U.S. auto lenders use, where each payment covers that month’s interest and the rest pays down the balance.
Taxable price = price − trade-in (or the full price, depending on your state)
Sales tax = taxable price × tax rate
Amount financed = price + tax + fees − down payment − trade-in
Monthly payment = P × r ÷ (1 − (1 + r)−n), r = APR ÷ 12, n = months
At 0% APR: payment = P ÷ n
Worked example
A $32,000 car with $3,000 down and a $5,000 trade-in, in a state that charges 6% tax on the price after trade-in. Tax is 6% of $27,000 = $1,620. With $600 of fees rolled in, you borrow 32,000 + 1,620 + 600 − 3,000 − 5,000 = $26,220.
At 7% APR for 60 months, r = 0.07 ÷ 12 = 0.005833. The payment is 26,220 × 0.005833 ÷ (1 − 1.005833−60) = $519.19. The first month’s interest is 26,220 × 0.005833 = $152.95, so $366.24 goes to the balance. Over five years you pay $31,151.24, of which $4,931.24 is interest.
If the same state taxed the full $32,000 instead, tax would be $1,920, the loan $26,520 and the payment $525.13. At 0% APR the original loan would be $437 a month with no interest.
Before you sign
- Ask for the out-the-door price in writing so every tax and fee is on the table.
- Compare the APR, not just the monthly payment. A longer term lowers the payment but usually raises the total interest. The Consumer Financial Protection Bureau’s auto loan guide walks through comparing offers.
- Your sales tax rate is usually set by where you register the car, including any county or city rate. Your state revenue department publishes the current rate and whether trade-ins reduce the taxable amount.
Questions people ask
How is a car loan payment calculated?
Lenders use the standard fixed-rate 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. $26,220 at 7% APR for 60 months is $519.19 a month. At 0% APR it is simply the amount divided by the months.
Does my state tax the car price before or after the trade-in?
It depends on the state. Many states tax only the difference between the price and your trade-in, which can save hundreds of dollars; others tax the full price. Some also treat dealer fees as taxable. This calculator has a switch for the trade-in rule. Check your state revenue department or ask the dealer for the exact tax line before you sign.
What fees should I include?
Common ones are title, registration and plates, a documentation (doc) fee charged by the dealer, and sometimes an electronic filing fee. Ask the dealer for an out-the-door price, which lists every fee, and enter the total. Doc fees vary widely and some states cap them.
Is it better to roll tax and fees into the loan?
Paying them up front means you borrow less and pay no interest on them. Rolling them in keeps cash in your pocket but you pay interest on the tax and fees for the whole term. Switch the option to see the difference in total interest.
What if I still owe money on my trade-in?
Subtract what you owe from the trade-in offer and enter the result as the trade-in value. If you owe more than the car is worth (negative equity), that difference is usually added to the new loan; enter it as an extra fee here so it is financed. Rolling negative equity into a new loan makes it more likely you will owe more than the next car is worth.
Why does the last payment differ by a few cents?
Payments are rounded to the cent, so a few cents of rounding build up over the loan. The final payment is adjusted to bring the balance to exactly zero, which is how most lenders handle it.