Car Loan Calculator

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Calculate your monthly car payment with taxes, fees, and trade-in value. Compare loan offers and view a full amortization schedule. Not sure whether to lease or buy? Our Lease vs Buy Car Calculator runs a full cost comparison. For the true total cost of ownership including insurance and maintenance, see the Total Car Cost Calculator. To find out what loan you can afford on your income, use the Loan Affordability Calculator.

Enter your loan details to see your exact monthly payment and total interest cost—then use the side-by-side comparison mode to pit two financing offers against each other and pick the better deal.

Advanced Options (Trade-in, Taxes, Fees, Extra Payments)
Trade-In

In most US states, sales tax is calculated on (price - trade-in value)

Taxes & Fees
Extra Payments

How a Car Loan Payment Is Calculated

A car loan is an amortizing loan with fixed monthly payments. Each payment is split between interest (cost of borrowing) and principal (repayment of the loan balance). In the early months, a larger portion goes to interest because the outstanding balance is high. As you pay down the principal, the interest share shrinks and more of each payment goes toward the balance.

The "financed amount" is what you actually borrow — it is not just the sticker price of the car. It is the purchase price minus your down payment and trade-in credit, plus any taxes, dealer fees, and registration costs that are rolled into the loan. Understanding this distinction is essential because many buyers are surprised that their loan amount is higher than the car price.

Your monthly payment depends on three factors: the financed amount, the interest rate (APR), and the loan term. A higher financed amount or higher rate means a higher payment. A longer term lowers the monthly payment but increases total interest — sometimes dramatically. Use this calculator to explore the tradeoffs.

Car Loan Formulas (With Examples)

Monthly Payment Formula (PMT)

The standard annuity payment formula used by lenders:

M = P × [r(1 + r)n] / [(1 + r)n − 1]

Where M = monthly payment, P = principal (financed amount), r = monthly interest rate (APR ÷ 12 ÷ 100), n = total number of payments (months).

Example: A $25,000 loan at 6.5% APR for 60 months: r = 0.065/12 = 0.005417, M = 25,000 × 0.005417 × 1.00541760 / (1.00541760 − 1) = $489.15/month.

Total Interest and Total Cost

Total interest = (monthly payment × term) − financed amount. For the example above: ($489.15 × 60) − $25,000 = $4,349 in interest. Total cost to the buyer includes down payment + all loan payments.

How Taxes, Fees, Down Payment, and Trade-In Change the Loan Amount

Financed amount = Price − Down Payment − Trade-In (net) + Sales Tax + Fees. For a $30,000 car with $3,000 down, $5,000 trade-in (nothing owed), 7.5% tax (on $25,000 after trade-in deduction), and $800 in fees: Financed = 30,000 − 3,000 − 5,000 + 1,875 + 800 = $24,675.

Taxes, Fees, and Trade-In Explained

Sales Tax on Car Purchases

In the US, sales tax on vehicles varies by state from 0% (Montana, Oregon, New Hampshire, Delaware, Alaska) to over 10% (some California counties when combined with local tax). In most states, the trade-in value reduces the taxable amount — so a $30,000 car with a $5,000 trade-in is taxed on $25,000. This calculator lets you toggle this option since tax rules vary. Always check your state's specific rules or consult the APR calculator for total borrowing cost.

Negative Equity on a Trade-In

Negative equity occurs when you owe more on your current car than it is worth. If your car's trade-in value is $8,000 but you still owe $11,000, you have $3,000 in negative equity. This $3,000 gets added to your new loan, increasing the financed amount. It is one of the most expensive mistakes in car financing because you start the new loan already underwater. If possible, pay down your current loan before trading in, or increase your down payment to offset the negative equity. Use the debt payoff calculator to plan the most efficient way to reduce your existing balance.

Extra Payments and Paying Off Early

Making extra payments is one of the most effective strategies to save on a car loan. Every extra dollar goes directly to principal, reducing the balance that accrues interest. The effect compounds: a lower balance means less interest next month, which means more of your regular payment goes to principal, which lowers the balance even further.

Example: On a $25,000 loan at 6.5% for 60 months, paying just $100 extra each month saves approximately $1,100 in interest and pays off the loan 13 months early. Even a one-time payment of $2,000 at month 6 can save $500+ in interest.

Before making extra payments, check your loan agreement for prepayment penalties. Most auto loans do not have them, but some subprime lenders include "rule of 78s" or other penalty clauses. Also verify that your extra payments are applied to principal reduction, not just advancing your next due date. You can track the impact using the general loan calculator for comparison.

Compare Two Car Loans

When shopping for a car loan, you will likely receive multiple offers with different APRs, terms, and fees. The Compare Loans tab lets you enter two offers side by side and see which one costs less overall. A lower monthly payment does not always mean a better deal — a longer term with lower payments often has much higher total interest.

Example: Offer A: 6.5% APR, 60 months, $800 fees. Offer B: 5.9% APR, 48 months, $500 fees. Offer B has a higher monthly payment ($587 vs $489) but saves $1,800 in total interest and costs $300 less in fees. If you can afford the higher payment, Offer B is the better deal.

Always compare the true APR which includes fees, not just the advertised interest rate. Dealer promotions with "0% APR" may have higher vehicle prices that offset the rate savings. And remember: pre-approval from your bank or knowing your affordability limit gives you leverage in negotiations.

Car Loan Examples

1. Standard New Car Purchase

$30,000 car, $3,000 down (10%), 6.5% APR, 60 months, $800 fees, 7.5% tax ($2,025 on $27,000). Financed: $29,825. Monthly payment: $583. Total interest: $5,155. Total cost: $38,155.

2. No Down Payment

$25,000 car, $0 down, 8.0% APR, 60 months, $600 fees, 6% tax ($1,500). Financed: $27,100. Monthly payment: $550. Total interest: $5,870. Total cost: $32,870. Higher rate and no down payment increase total cost significantly.

3. Trade-In Reduces Loan

$35,000 car, $5,000 down, $8,000 trade-in (no balance owed), 6.0% APR, 60 months. Tax (7%) calculated on $27,000 = $1,890. Fees $700. Financed: $23,590. Monthly payment: $456. Total interest: $3,770.

4. Negative Equity Trade-In

$30,000 car, $4,000 down, $10,000 trade-in but $13,000 owed (−$3,000 equity), 7.0% APR, 60 months. Tax (7.5%) on $20,000 = $1,500. Fees $800. Financed: $31,300. Monthly payment: $620. Warning: starting $1,300 underwater on the new car.

5. Extra Payments Savings

$28,000 financed at 6.5%, 60 months, $100 extra/month. Without extras: $5,487 interest, 60 months. With extras: $4,321 interest, 48 months. Saves $1,166 and 12 months.

6. High APR Used Car

$15,000 used car, $2,000 down, 15% APR, 48 months. Financed: $13,000. Monthly payment: $362. Total interest: $4,367. At this rate, total cost is nearly 130% of the car price. Shopping for a lower rate or improving credit score first could save thousands.

7. Short Term vs Long Term

$25,000 financed at 6.5%: 36 months: $766/mo, $2,571 interest. 72 months: $426/mo, $5,653 interest. The 72-month option costs $3,082 more in interest — a 120% increase — for the convenience of a lower payment.

8. 84-Month Extended Term

$30,000 financed at 7.0%, 84 months. Monthly payment: $454. Total interest: $8,123. After 3 years (36 payments) you still owe $20,100 on a car that may be worth $15,000 — deep in negative equity territory. Consider the lease vs buy comparison as an alternative.

9. Comparing Dealer vs Bank Offers

Dealer: 6.9% APR, 60 months, $900 fees. Bank: 5.5% APR, 60 months, $250 fees. On $28,000 financed, the bank offer saves $1,250 in interest and $650 in fees — $1,900 total savings. Always get pre-approved before visiting the dealer.

10. 0% APR Promotional Financing

$32,000 car with manufacturer 0% APR for 48 months vs $28,000 negotiated price at 6.0% for 48 months. At 0%: $667/mo, $0 interest, $32,000 total. At 6.0%: $658/mo, $3,568 interest, $31,568 total. The negotiated price is $432 cheaper despite paying interest. Always calculate both options — 0% is not always the best deal.

Tips to Get a Lower Car Loan Payment

  1. Increase your down payment. Every extra $1,000 down reduces your financed amount and saves on interest over the full term.
  2. Improve your credit score before applying. A 50-point credit score improvement can drop your rate by 1–2%, saving thousands. Check and dispute any errors on your credit report. Use the salary calculator to understand your income picture.
  3. Shop at least 3 lenders. Compare your bank, a credit union, and the dealer's financing. Credit unions often offer the best rates for members.
  4. Choose a shorter term. A 48-month loan costs more per month but dramatically less in total. If you can handle the payment, it is the financially smarter choice.
  5. Negotiate the vehicle price first. A lower purchase price directly reduces your financed amount. Negotiate the price before discussing financing.
  6. Consider certified pre-owned. CPO vehicles are typically 20–30% cheaper than new with similar warranty coverage, significantly lowering your loan amount.
  7. Make extra payments. Even $50/month extra makes a noticeable difference on a 5-year loan. Set up automatic extra payments if your lender allows it.
  8. Avoid add-ons in financing. Extended warranties, paint protection, and GAP insurance should be priced separately — dealers often mark these up substantially when rolled into the loan.
  9. Use a budget calculator to determine what payment you can truly afford before shopping, so you do not get talked into a longer term to hit a "comfortable" payment.
  10. Time your purchase. End-of-month, end-of-quarter, and end-of-year typically offer better deals as dealers push to meet sales targets. Model year changes also bring discounts on outgoing models.

FAQ

How is a car loan monthly payment calculated?
The monthly payment uses the standard annuity formula: M = P × [r(1+r)^n] / [(1+r)^n − 1], where P is the financed amount, r is the monthly interest rate (APR / 12), and n is the number of months. The financed amount includes the car price minus down payment and trade-in, plus taxes and fees.
What is the difference between APR and interest rate?
The interest rate is the base cost of borrowing. APR (Annual Percentage Rate) includes the interest rate plus mandatory fees like origination charges, expressed as a yearly rate. APR is always equal to or higher than the interest rate and gives a more complete picture of loan cost. This calculator uses APR for accurate results.
How much down payment should I put on a car?
Financial experts recommend at least 20% down for a new car and 10% for used. A larger down payment reduces the financed amount, lowers your monthly payment, decreases total interest, and helps avoid being upside-down on your loan. Even an extra $1,000 down can save hundreds in interest over the loan term.
Does a larger down payment reduce total interest?
Yes. A larger down payment directly reduces the principal you borrow. Since interest is calculated on the outstanding balance, a lower principal means less interest accrues each month. For example, putting $5,000 extra down on a 6.5% APR 60-month loan saves roughly $600–700 in total interest.
How do taxes affect my car loan amount?
Sales tax is typically calculated on the purchase price (or purchase price minus trade-in in many US states) and added to the financed amount if not paid upfront. A 7.5% tax on a $30,000 car adds $2,250 to your loan, which increases monthly payments and total interest. Some states have no sales tax on vehicles.
Are dealer fees included in the loan?
Yes, dealer and administrative fees (documentation fees, registration, title transfer) are usually rolled into the financed amount. These fees vary by dealer and state, typically $200–$1,000. Always ask for a full breakdown of fees before signing — and remember, doc fees are often negotiable.
How does a trade-in affect a car loan?
A trade-in reduces the amount you need to finance. If your trade-in is worth $8,000, the dealer deducts that from the car price before calculating your loan. In many US states, a trade-in also reduces the taxable amount, saving you additional money on sales tax.
What is negative equity on a trade-in?
Negative equity (being "upside down" or "underwater") means you owe more on your current car than it is worth. If your car is worth $8,000 but you owe $11,000, you have $3,000 in negative equity. This amount gets rolled into your new loan, increasing your financed amount and monthly payment.
Can I roll negative equity into a new loan?
Yes, most lenders allow it, but it is risky. Rolling $3,000–5,000 of negative equity into a new loan means you start underwater on the new car immediately. You will owe more than the car is worth, which creates problems if you need to sell or if the car is totaled. Consider paying down the existing loan first or making a larger down payment.
What loan term is best: 48, 60, 72, or 84 months?
48–60 months is the sweet spot for most buyers. A 48-month loan has higher payments but the lowest total cost. A 60-month loan is the most popular, balancing affordability and total interest. Loans of 72–84 months have lower payments but significantly higher total interest and greater risk of negative equity.
Why do longer terms cost more overall?
Two reasons: you pay interest for more months, and you pay down the principal more slowly. On a $25,000 loan at 6.5%, a 48-month term costs about $3,445 in interest, while an 84-month term costs about $6,220 — nearly twice as much. The longer the term, the more each dollar of principal accrues interest before being repaid.
How do extra payments reduce interest?
Extra payments go directly toward principal, reducing the balance faster. Since interest is calculated on the remaining balance each month, a lower balance means less interest accrues. This creates a compounding savings effect: each extra payment saves on all future interest calculations. Even $50–100 extra per month can save thousands over the loan.
How much interest can I save by paying $100 extra per month?
It depends on your loan size and rate. On a $25,000 loan at 6.5% for 60 months, paying $100 extra each month saves roughly $1,100 in interest and pays off the loan about 13 months early. Use the extra payments feature in this calculator to see exact savings for your loan.
What is an amortization schedule?
An amortization schedule is a month-by-month table showing how each payment splits between interest and principal, plus the remaining balance. Early payments are mostly interest; later payments are mostly principal. The schedule helps you understand where your money goes and plan extra payments strategically.
Can I pay off my car loan early without penalties?
Most car loans in the US do not have prepayment penalties, but some do — especially subprime loans. Check your loan agreement for a prepayment clause before making extra payments. If there is a penalty, calculate whether the interest savings from early payoff exceed the penalty cost.
How can I lower my monthly car payment?
Five main strategies: (1) increase your down payment, (2) extend the loan term (but you pay more interest overall), (3) find a lower interest rate by shopping multiple lenders, (4) choose a less expensive car, (5) use a trade-in to reduce the financed amount.
How can I lower my total loan cost?
Focus on three factors: (1) get the lowest APR possible — even 0.5% lower saves hundreds, (2) choose the shortest term you can afford, (3) make extra payments when you can. Also consider paying taxes and fees upfront instead of financing them.
Should I finance taxes and fees or pay them upfront?
Paying upfront saves money because you avoid paying interest on those amounts over the entire loan term. Financing $3,000 in taxes and fees at 6.5% for 60 months adds about $400 in interest. If you have the cash available, paying upfront is the better financial choice.
Is it better to finance through a dealer or a bank?
Compare both. Dealers sometimes offer promotional rates (0% or very low APR) that beat any bank. However, standard dealer financing is often marked up 1–2% above what a bank or credit union would offer. Get pre-approved at your bank or credit union first, then see if the dealer can beat that rate.
How accurate is this car loan calculator?
This calculator uses the same standard amortization formula that lenders use. The monthly payment and amortization schedule are accurate for fixed-rate loans. Actual costs may vary slightly based on exact payment dates, rounding methods, and any fees specific to your lender. Use it as a precise planning tool, then confirm exact numbers with your lender.
What credit score do I need for a good car loan rate?
Credit scores of 720+ typically qualify for the best rates (4–6% in the current market). Scores of 660–719 get average rates (6–9%). Below 660, rates can range from 9% to 20%+. Improving your credit score before applying — even by 30–50 points — can save thousands over the life of the loan.
What is a good APR for a car loan?
As of 2025–2026, good APRs are roughly 5–7% for new cars and 7–10% for used, assuming good credit. Excellent credit (750+) may get rates as low as 3.5–5%. Anything above 12% is high and worth shopping around to improve. Manufacturer financing promotions can offer 0–2.9% on select models.
What if my interest rate changes?
Most car loans are fixed-rate, meaning your rate and payment stay the same for the entire term. Variable-rate auto loans are uncommon but do exist — if yours adjusts, your payment will change when the rate changes. This calculator models fixed-rate loans. For variable-rate loans, use the current rate as an approximation.
How do I compare two car loan offers?
Use the Compare Loans tab in this calculator. Enter the same car details but different APR, term, and fees for each offer. Compare monthly payment, total interest, and total cost. The offer with the lowest total cost is usually the better deal, unless the payment difference makes one offer unaffordable.
What are common mistakes when financing a car?
The most common mistakes are: (1) focusing only on monthly payment instead of total cost, (2) choosing an 84-month term to afford a more expensive car, (3) rolling negative equity into a new loan, (4) not shopping multiple lenders, (5) not reading the fine print on fees and penalties, (6) financing add-ons like extended warranties and GAP insurance without comparing prices.

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