How to use the car loan calculator
- Enter the vehicle price you have negotiated, your down payment and any trade-in value.
- If you still owe money on the trade-in, enter it — it is added to the new loan.
- Add your state’s sales tax rate and the title, registration and dealer fees, and choose whether they are paid up front or financed.
- Enter the APR from your pre-approval or the dealer, and the term.
The formula
Sales tax = (Price − Trade-in) × Tax rate Amount financed = Price − Down payment − Trade-in + Amount owed (+ tax and fees if rolled into the loan) Monthly payment = P × r ÷ (1 − (1 + r)^−n) r = APR ÷ 12, n = months Total interest = Payment × n − Amount financed
Worked example
A $35,000 car with $5,000 down, financed at 6.5% APR for 60 months:
- Amount financed = $30,000
- Monthly payment = $586.98
- Total interest = $35,219 − $30,000 = $5,219
How the loan term changes the cost ($30,000 at 6.5%)
| Term | Monthly payment | Total interest |
|---|---|---|
| 36 months | $919.47 | $3,101 |
| 48 months | $711.45 | $4,150 |
| 60 months | $586.98 | $5,219 |
| 72 months | $504.30 | $6,309 |
| 84 months | $445.48 | $7,421 |
In practice lenders often charge higher rates on longer loans, so the real difference is usually bigger than this.
Tips to pay less for your car loan
- Get pre-approved by a bank or credit union before visiting the dealer, so you know a fair rate and can compare offers.
- Negotiate the price, not the payment: a dealer can hit any monthly payment by stretching the term.
- Check your credit: borrowers with excellent credit get much lower APRs than those with fair or poor credit.
- Watch add-ons: extended warranties, GAP insurance and paint protection rolled into the loan also accrue interest.
- Pay extra when you can: most auto loans are simple interest, so extra payments go to principal and cut total interest.
- Look for 0% or low-APR deals from manufacturers, but compare them with any cash rebate you give up to get them.
Budgeting for the full cost
The payment is only part of owning a car. Insurance, fuel or charging, maintenance, registration and depreciation together often cost as much again. A popular rule of thumb is to keep the car payment plus insurance under about 10–15% of your take-home pay, so a car doesn’t crowd out saving and other goals.
Leasing vs buying
A lease usually has a lower monthly payment because you pay only for the car’s expected loss in value during the lease, plus a finance charge (the “money factor”). At the end you hand the car back or buy it. Leases suit people who like a new car every few years and drive a predictable number of miles; buying and keeping a car for many years is almost always cheaper overall. Watch for mileage limits and wear-and-tear charges on leases.