Car Payment Calculator

From sticker price to amount financed

The number a lender finances is never the sticker price. Start with the vehicle price, subtract the down payment and the trade-in credit, then add sales tax and the fees the dealer rolls into the contract. On a common deal: a 28,500 dollar car with a 2,500 dollar trade-in leaves a taxable base of 28,500 - 2,500 = 26,000. At a 6.25 percent tax rate the tax is 26,000 x 0.0625 = 1,625.

Add the charges and subtract the cash: 28,500 - 3,000 - 2,500 + 1,625 + 450 = 25,075 financed. The last 450 covers title, registration and the documentation fee.

Most states tax the price after the trade-in credit, though a few tax the full price before any credit, and some cap the credit. Rebates usually come off before financing. The consumerfinance.gov auto loan guide walks through which charges lenders may roll into the contract.

The monthly payment formula

Every amortizing auto loan uses the same formula: M = L x [ c(1 + c)^n ] / [ (1 + c)^n - 1 ]. L is the amount financed, c is the APR divided by 12, and n is the number of monthly payments. The formula charges interest on the remaining balance each month, so early payments are mostly interest and late payments are mostly principal.

On the 25,075 example at 6.9 percent, the monthly rate c is 0.069 / 12 = 0.00575. The first month of interest is 25,075 x 0.00575 = 144.18, so the first 495.33 payment retires only 495.33 - 144.18 = 351.15 of principal. By the final payment the split has flipped, with nearly the whole amount going to principal.

Zero percent offers are the one special case: with no rate, the balance divides evenly by the term. A 10,000 balance over 48 months is 10,000 / 48 = 208.33 with nothing added on top.

Worked example: 28,500 car, 6.9 percent, 60 months

Carry the example all the way through. The loan starts at 25,075 for 60 months at 6.9 percent APR, and the payment works out to 495.33 a month. Sixty payments total 495.33 x 60 = 29,719.80, so the interest is 29,719.80 - 25,075 = 4,644.80.

That interest figure is about 18.5 percent of the amount financed, the price of spreading 25,075 over five years. Counting the 3,000 down payment, the 2,500 trade-in value and all 60 payments, the all-in cost is 3,000 + 2,500 + 29,719.80 = 35,219.80.

The gap over the sticker price is 6,719.80, split between 2,075 of tax and fees and 4,644.80 of interest. That split is worth seeing before you sign, because the interest half responds to rate shopping and the term, while the tax and fee half is mostly fixed by where you live.

How the term moves the payment

Term length trades monthly relief for total cost. On the same 25,075 loan at 6.9 percent, stretching from 60 to 72 months cuts the payment by 69.03 but adds 973.80 of interest. Cutting to 48 months raises the payment by 103.96 and saves 953.88.

Long terms carry a second cost that the table does not show: the car depreciates faster than the balance falls, so 72 and 84 month loans can leave the owner owing more than the car is worth for years. That gap is what gap insurance exists to cover, and it is also why many lenders cap terms at 72 or 75 months.

How the rate moves the payment

Rate shopping pays. On the 25,075 loan over 60 months, each full point of APR is worth about 12 dollars a month at this loan size, and the interest column moves faster than the payment column because the term stays fixed.

Credit unions and banks quote rates before you visit a dealership, and a preapproval turns the dealer rate discussion into a comparison instead of a negotiation. The Federal Reserve G.19 release publishes average finance rates for new and used car loans, a fair baseline before you sign anything. Collect two or three written offers, since local credit unions often quote the lowest rates on used vehicles.

Sales tax, fees and trade-in rules

Sales tax treatment varies more than most buyers expect. Most states compute tax on the price minus the trade-in, so the 2,500 credit in the example saves 2,500 x 0.0625 = 156.25 of tax, not just the 2,500 of price. A handful of states tax the full price regardless of the trade, and a few cap the credit at a fixed amount.

Fees divide into government charges, like title and registration, and dealer charges, like the documentation fee. Both usually finance. Paying them in cash lowers the loan but not the obligation. The FTC car buying guidance lists which charges are negotiable and which the state sets.

Rebates reduce the taxable price in some states and are taxed up front in others. The calculator treats a rebate as a straight reduction of the amount financed, which matches how most contracts apply it after tax is computed.

Paying extra: what 50 dollars a month does

The example loan at 495.33 plus an extra 50 comes to 495.33 + 50 = 545.33 a month. At that pace the balance clears in about 54 months instead of 60, and total interest drops from 4,644.80 to about 4,130, roughly 515 kept in your pocket.

Extra payments work because simple interest loans charge interest daily on the remaining balance. Direct the extra amount to principal and check the statement to confirm it was applied that way; some servicers advance the due date instead, which feels helpful but skips the saving entirely.

One caution: a loan with a precomputed interest schedule or a prepayment penalty can blunt the benefit, so read the contract before building a payoff plan. Dealer-arranged loans in a few states use precomputed schedules, and refinancing out of one costs more than the extra payments save.

What the payment leaves out

A monthly payment answers one question: does the loan fit the budget? It says nothing about the other costs that arrive with the car. Insurance on a financed vehicle usually carries full coverage requirements, fuel and maintenance run their own budgets, and registration renews every year or two.

Depreciation is the quiet one. A new car can lose a large share of its value in the first two years while the loan balance falls slowly, which is why long terms and small down payments create negative equity. The consumerfinance.gov auto loan resources explain how negative equity rolls into a next purchase if you trade early.

Use the payment as the entry gate, then budget the rest. A rule of thumb many planners use is to keep the payment below 10 percent of take home pay and the full cost of ownership below 20 percent. The breakdown table in the calculator shows where every dollar of the monthly figure goes, so the trade-offs stay visible while you adjust the inputs.