How to use the Auto Loan Calculator
- Enter the vehicle price and your down payment.
- Enter the value of any trade-in and your local sales tax rate.
- Enter the loan interest rate and choose the term in months.
- Read the monthly payment, the amount financed and the total interest. Try several terms to see the trade-off.
Formula used
Amount financed = price + sales tax − down payment − trade-in. Monthly payment = L × r × (1 + r)ⁿ ÷ ((1 + r)ⁿ − 1), with r the monthly rate and n the number of months.
Worked example
Here is the Auto Loan Calculator worked through with the example values shown above, so you can check each step by hand.
| Inputs | |
|---|---|
| Vehicle price | $30,000 |
| Down payment | $3,000 |
| Trade-in value | $0 |
| Sales tax | 6 % |
| Loan interest rate | 7 % |
| Loan term | 60 months |
| Result | |
| Monthly payment | $570.27 |
| Amount financed | $28,800 |
| Total interest | $5,416 |
| Total of all payments | $34,216 |
Payment by loan term
The default car and rate over different terms. A longer term lowers the payment but raises the interest.
| Loan term | Monthly payment | Total interest |
|---|---|---|
| 36 | $889.26 | $3,213 |
| 48 | $689.65 | $4,303 |
| 60 | $570.27 | $5,416 |
| 72 | $491.01 | $6,553 |
| 84 | $434.67 | $7,712 |
What the calculation does
First the calculator works out the amount you need to finance: the price plus sales tax, minus your down payment and trade-in. For a $30,000 car with 6% sales tax, $3,000 down and no trade-in, that is $31,800 − $3,000 = $28,800.
Then the monthly payment uses the standard loan formula. At 7% over 60 months, the payment is $570.27. You would pay $34,216 in total, of which $5,416 is interest.
Short term or long term?
A longer term lowers the payment but increases the interest. On the same loan, 36 months costs $889.26 a month with $3,213 of interest, while 84 months costs $434.67 a month with $7,712 of interest. The longer loan saves about $455 a month and costs about $4,499 more over the loan.
A long loan also raises the risk of owing more than the car is worth, because cars lose value faster in the early years. That can be a problem if you need to sell or the car is damaged. Many buyers aim for the shortest term that fits the budget.
The effect of your down payment and trade-in
Each dollar you put down is a dollar you do not borrow and pay interest on. With $6,000 down instead of $3,000, the amount financed falls to $25,800 and the monthly payment to $510.87. A trade-in works the same way, and in some places the sales tax is charged only on the difference between the new car price and the trade-in value, so check your local rules and adjust the price or tax rate if that applies to you.
Putting down 10% to 20% of the price is a common way to avoid starting the loan owing more than the car is worth.
Costs beyond the loan payment
The cost of a car is more than the loan. Insurance, fuel, maintenance, registration, parking and depreciation all add to the monthly cost. Dealer fees such as documentation and delivery may be added to the price, so include them in the price field if you will pay them.
Use this calculator as a first step, and then compare financing offers from your bank, a credit union and the dealer. The interest rate you qualify for depends on your credit, the loan term and whether the car is new or used.
Frequently asked questions
How is a car payment calculated?
The amount financed is amortised over the number of months at the monthly interest rate using the standard loan formula. Sales tax is added to the price before subtracting your down payment and trade-in.
Is sales tax charged on the full price?
It depends on where you live. In some places tax applies only to the price after trade-in. This calculator applies the rate to the vehicle price you enter, so adjust the price or rate to match your rules.
Are registration and dealer fees included?
No. Add them to the price if you plan to finance them.
What loan term is best?
The shortest term whose payment fits your budget. Longer terms have lower payments but much more interest and a higher chance of owing more than the car is worth.
Does a bigger down payment help?
Yes. It reduces the amount you borrow, lowers the payment and cuts the total interest.
Can I use this for a used car?
Yes. Enter the used car price and the rate you are offered. Used-car rates are often higher than new-car rates.
This calculator gives estimates for information only. Actual figures from a bank, employer, tax authority or doctor may differ. It is not financial, tax, legal or medical advice.