Car Loan Calculator with Tax, Trade-In & Down Payment

What goes into the amount financed

Start with the vehicle price, add sales tax, and subtract your down payment and trade-in. In most states sales tax applies to the price minus the trade-in value, which is a real saving: a $10,000 trade-in at 6 percent tax saves $600. A few states, including California, tax the full price regardless of trade-in. The calculator assumes the trade-in credit applies; if your state doesn't allow it, set the trade-in to zero and lower the price by the trade value instead.

The payment formula is the standard amortization equation: payment = L × r(1 + r)^n ÷ ((1 + r)^n − 1), with L the amount financed, r the APR divided by 12, and n the number of months.

Worked example: a $35,000 car

Price $35,000, $5,000 down, no trade-in, 6 percent sales tax, 7 percent APR. Tax adds $2,100, so the amount financed is $35,000 + $2,100 − $5,000 = $32,100. Over 60 months, the payment is $635.62 and total interest is $6,037.

Stretch the same loan to 72 months and the payment falls to $547.27, but interest rises to $7,304. At 84 months, the payment is $484.48 and interest is $8,596. At 48 months, the payment is $768.67 and interest only $4,796. Going from 48 to 84 months saves $284 a month and costs $3,800 more overall. Longer loans often carry higher APRs too, which makes the gap bigger than this example shows.

The negative equity trap

A new car commonly loses 20 percent or more of its value in the first year. On a long loan with a small down payment, you can owe more than the car is worth for years. That matters if the car is totaled or you want to sell: insurance pays market value, not your loan balance, and the difference comes out of your pocket unless you have GAP insurance.

Rolling negative equity from an old loan into a new one is how people end up with $40,000 loans on $30,000 cars. The CFPB warns specifically about this. If you owe more than your trade is worth, the best move is usually to keep driving it and pay down the balance first.

How much car can you afford?

A widely used guideline is 20/4/10: put at least 20 percent down, finance for no more than four years, and keep total car costs, including insurance and fuel, under 10 percent of gross income. On a $75,000 salary that is about $625 a month for everything. Many buyers break the rule, but it keeps a car from crowding out savings.

Lenders look at your debt-to-income ratio, and your car payment counts. The debt-to-income calculator shows how a new payment changes that ratio before you apply.

Getting a better rate

Your credit score drives the APR more than anything else. Borrowers with excellent credit get the lowest rates, while subprime borrowers can pay several times as much, which on $32,100 over 60 months can mean thousands of dollars. Check your credit reports for free at AnnualCreditReport.com before shopping.

Get pre-approved by a bank or credit union before you visit a dealer. With a rate in hand, you can compare the dealer's financing offer on equal terms and negotiate the price separately from the payment. Dealers who ask 'what monthly payment do you want?' can hit any number by stretching the term. Negotiate the out-the-door price first.

Costs this calculator leaves out

Documentation fees, title and registration, and dealer add-ons such as extended warranties, paint protection, and GAP coverage are not included. They can add $1,000 to $3,000 or more. If you finance them, add them to the price field. Insurance, fuel, and maintenance are ongoing costs outside the loan; the fuel cost calculator helps estimate that part. All calculations run in your browser.