Total Installment Price Calculator

What the Total Installment Price Adds Up To

A total installment price answers one question: if you add the down payment to every scheduled payment, what does the purchase cost? Federal disclosure rules for closed-end credit call the same figure the total sale price. Under Regulation Z, 12 CFR 1026.18(j), it is the cash price plus any amounts financed under 1026.18(b)(2) plus the finance charge, and the disclosure must state the down payment in dollars. That sentence collapses into a shorter form:

Total sale price = down payment + total of payments

Total of payments = payment amount x number of payments

The second formula is why a low monthly payment can hide a high price. Stretch 48 payments into 72 and the payment drops by a quarter while the total climbs by $1,800 on a $10,000 balance. Nothing about the car or the appliance changed except the number of times you pay for it.

Regulation Z defines the total of payments separately at 12 CFR 1026.18(h) as the sum of the payments scheduled to repay the obligation. The two definitions sit a few paragraphs apart in the same section, and sales staff quote them as if they were interchangeable, which is how a buyer ends up comparing one dealer's total of payments against another dealer's total sale price and concluding the wrong deal is cheaper.

One scope note: 1026.18 covers closed-end credit such as car paper and installment contracts. Mortgages use the timetable in 1026.19, and vehicle leases follow Regulation M at 12 CFR part 1013.

Four Numbers That Get Confused

Every closed-end installment contract in the country carries four dollar figures, and only one of them can be compared to a cash price. Here they are for a $12,000 purchase with $2,000 down, $10,000 financed over 48 months at 9 percent add-on interest.

Amount financed is the number interest is computed on, not a number you pay. Finance charge is the price of borrowing, not the price of the goods. Total of payments covers the loan but ignores the cash you handed over at signing. Total sale price is the only one that stands next to a cash price and lets you ask a clean question: is paying $15,600 over four years worth more to me than paying $12,000 today?

Two smaller traps sit inside these labels. A prepaid finance charge, such as a loan origination fee taken out of the proceeds, reduces the amount financed while still counting in the finance charge, so the two numbers move in opposite directions. And a service contract or gap insurance rolled into the contract raises the amount financed, which raises the finance charge on every later payment.

Add-On Interest Versus Simple Interest

Add-on interest, also called flat rate or precomputed interest, calculates the finance charge on the original balance for the whole term, then spreads that fixed charge across the payments. The balance falls every month; the interest does not.

Finance charge (add-on) = amount financed x annual rate x years

Payment (add-on) = (amount financed + finance charge) / number of payments

Simple interest amortization works the other way. Interest accrues on the unpaid balance, so a payment made in month 3 stops interest on that principal for the remaining 45 months.

Payment (amortized) = amount financed x i / (1 - (1 + i)^-n), where i is the monthly rate and n is the number of payments.

Both contracts say 9 percent on the page. One costs $1,655.20 more. The gap exists because add-on interest charges 9 percent of $10,000 in each of the four years, while simple interest charges 9 percent of a balance that averages roughly half the original amount.

The true annual percentage rate on an add-on contract commonly lands near 1.8 times the quoted rate on a four year term: 15.99 divided by 9 is 1.78. Shorten the term to 24 months and the multiple rises to 1.83; stretch it to 72 months and it falls to 1.72. That is a property of the arithmetic, not a rule of thumb you should trust in place of the APR box on the disclosure.

Worked Example: $12,000 Purchase, $2,000 Down, 48 Months

Add-on contract at 9 percent

1. Amount financed: $12,000 - $2,000 = $10,000.
2. Term in years: 48 / 12 = 4.
3. Finance charge: $10,000 x 0.09 x 4 = $3,600.
4. Total of payments: $10,000 + $3,600 = $13,600.
5. Monthly payment: $13,600 / 48 = $283.33.
6. Final payment: $13,600 - ($283.33 x 47) = $283.49, so the 48 payments total the full $13,600.
7. Total sale price: $2,000 + $13,600 = $15,600.

Simple interest contract at 9 percent APR

1. Monthly rate: 0.09 / 12 = 0.0075.
2. Payment: $10,000 x 0.0075 / (1 - 1.0075^-48) = $248.85.
3. Total of payments: $248.85 x 48 = $11,944.80.
4. Finance charge: $11,944.80 - $10,000 = $1,944.80.
5. Total sale price: $2,000 + $11,944.80 = $13,944.80.
6. Difference between the two contracts: $15,600 - $13,944.80 = $1,655.20.

That $1,655.20 equals 16.6 percent of the amount financed, and it is the entire cost of not asking which method the dealer used. Notice that the down payment is identical in both cases. It does not cushion an add-on contract; it only shrinks the balance the add-on charge is computed on.

A quick sanity check on the payment: $283.33 times 48 is $13,599.84, sixteen cents short of the disclosed total, which is exactly the kind of rounding difference that the final payment absorbs.

Worked Example: Two Dealer Quotes on a $28,000 Purchase

Quote A advertises 7.5 percent. Quote B advertises 8.9 percent. On the sticker, Quote A looks cheaper by 1.4 points. Run both on $25,000 financed over 60 months with $3,000 down.

1. Quote A finance charge: $25,000 x 0.075 x 5 = $9,375.
2. Quote A total of payments: $25,000 + $9,375 = $34,375.
3. Quote A payment: $34,375 / 60 = $572.92.
4. Quote A total sale price: $3,000 + $34,375 = $37,375.
5. Quote B monthly rate: 0.089 / 12 = 0.0074167.
6. Quote B payment: $25,000 x 0.0074167 / (1 - 1.0074167^-60) = $517.75.
7. Quote B total of payments: $517.75 x 60 = $31,065.
8. Quote B total sale price: $3,000 + $31,065 = $34,065.
9. Difference: $37,375 - $34,065 = $3,310.

Quote A's 7.5 percent works out to a 13.32 percent loan, and the buyer who picks it pays $55.17 more every month for five years. The reverse mistake happens too: a dealer quoting a true 8.9 percent APR can look expensive next to a competitor's 7.5 percent flat rate while being $3,310 cheaper in total. Convert every quote to both the APR and the total sale price before ranking them.

How Term Length Moves the Total

Term is the lever most buyers pull, because it is the one that changes the payment they see each month. On a fixed amount financed and a fixed add-on rate, a longer term lowers the payment and raises the total in a straight line.

Going from 48 to 72 months cuts the payment by $69.44 and adds $1,800 to the total sale price. In round terms, $69 a month costs $25 a month in extra interest over the same 72 months. The APR falls slightly as the term lengthens even though the total rises, which is why the APR alone cannot rank two offers with different terms. Total sale price can.

There is a second cost that never shows up on the disclosure: a 72 month contract on a vehicle usually keeps the buyer underwater on the loan for three years or more. Selling or trading before the balance catches up to the value means writing a check at the dealer's desk.

How the Down Payment Moves the Total

Down payment is the only input that reduces both the amount financed and the finance charge without stretching anything. On an add-on contract at 9 percent over 48 months, each $1,000 of down payment removes $360 of finance charge.

The relationship is linear on a fixed-rate add-on contract: $1,000 down saves $360 in finance charge and $28.33 in payment. On a simple interest contract the saving per $1,000 is smaller, because the interest on that $1,000 would have declined anyway as the balance amortized. Either way, a down payment is the only part of the deal that reduces the total sale price without adding months.

Watch for the trade-in version of this table. A dealer who offers $2,500 for a trade worth $4,000 and then shows a payment that fits your budget has moved $1,500 of value from your column into theirs. Negotiate the trade value and the cash price separately, then apply the down payment.

Read the Disclosure, Not the Monthly Payment

Four lines on the disclosure settle almost every installment question. The APR tells you the true annual cost of the credit. The finance charge tells you the dollars that cost represents. The total of payments tells you what the loan takes out of your account over its life. The total sale price tells you what the purchase costs when the down payment is included.

The Consumer Financial Protection Bureau publishes plain-language explanations of each term, and the regulation text in 12 CFR 1026.18 is short enough to read in ten minutes. Check three things before signing. First, whether the quoted rate is an APR or a flat add-on rate, since the two differ by a factor near 1.8 on a four year contract. Second, whether fees such as documentation, electronic filing, or a service contract have been financed into the amount financed, which quietly raises the finance charge. Third, whether the contract carries a prepayment penalty or a deferred interest clause, because either one can add cost after signing that the original total sale price never included.

If a payment is quoted without a total, ask for the total sale price in writing. A seller who cannot produce that number in a minute has not priced the deal yet.