Auto Loan Calculator

How the payment is calculated

The calculator works in two steps. First it builds the amount financed, which is what you actually borrow. Then it applies the standard formula for a fixed-rate loan repaid in equal monthly payments.

When you owe more on your trade-in than it is worth, E is negative. Subtracting a negative number adds it, so the shortfall becomes part of the new loan.

At 0% APR the formula reduces to the amount financed divided by the number of payments. Each month, interest is charged on the remaining balance and the rest of the payment reduces the balance. That split is what the amortization schedule shows.

Worked example

These are the calculator's default values: a $35,000 car, a $5,000 down payment and a trade-in worth $8,000 with $3,000 still owed. The state in this example taxes the price after the trade-in at 6%, and taxes and fees are included in the loan.

Sixty payments of $536.50 come to slightly less than the total shown, because the last payment is adjusted by a few cents to clear the balance exactly ($536.79 instead of $536.50).

Trade-ins and negative equity

Your trade-in helps only to the extent that it is worth more than what you still owe on it. If the dealer pays off a loan larger than the car's value, the difference (negative equity) is usually added to the new loan. The Consumer Financial Protection Bureau warns that rolling an old balance into a new loan makes the new loan more expensive.

Take the same purchase, but with a trade-in worth $5,000 that still has $9,000 owed on it. Instead of contributing equity, it adds $4,000 to the loan:

The amount financed ends up above the car's price. You start the new loan owing more than the car is worth, which makes the next trade-in harder too.

Sales tax: before or after the trade-in?

Rules differ by state and sometimes by county or city. Many US states charge sales tax only on the price after subtracting the trade-in, while others tax the full price. Calcendium does not assume a rate or a rule: enter your combined local rate and choose the method that applies to you. Your state's department of revenue or the dealer's buyer's order can confirm both.

In the example, taxing the full $35,000 instead of the $27,000 left after the trade-in raises the tax from $1,620 to $2,100. The monthly payment rises from $536.50 to $545.90.

Outside the US, a vehicle purchase price usually already includes VAT. In that case, set the sales tax rate to 0% and enter the price you are quoted.

How to read your results

Monthly payment tells you whether the loan fits your budget. Total interest and total vehicle cost tell you what the car really costs. Stretching the term is the easiest way to lower the payment, and it is also the most expensive:

Going from 48 to 84 months lowers the payment by $243.09 a month but adds $2,989.73 of interest. This assumes the same APR. In practice, lenders often charge a higher rate for longer terms, so the gap can be wider.

• Loan-to-price above 100% means you would owe more than the car's price from the first day. This is common when negative equity, taxes and fees are all financed.
• Cash due at signing is your down payment plus any taxes and fees you chose to pay upfront.
• To compare two financing offers, such as dealer financing against a credit union, use the loan comparison calculator.

Assumptions

• Fixed interest rate for the whole term; payments are made monthly, at the end of each month.
• The APR you enter is treated as the nominal annual rate and divided by 12 for each month.
• Interest is calculated on the remaining balance each month and rounded to the cent.
• The monthly payment is rounded to the cent. The final payment absorbs the small rounding difference.
• Sales tax is the rate you enter, applied to either the full price or the price minus the trade-in value. It is never less than zero.
• Fees are a single amount. They are either financed together with the tax, or paid at signing.
• Rebates and incentives are not modeled separately. Deduct them from the price if they apply.

Limitations

• Lenders may count days differently, charge interest daily or round in other ways. Your contract can differ from this estimate by a few dollars.
• Some fees and add-ons, such as service contracts or GAP coverage, may be taxed or financed differently from what is assumed here.
• Insurance, registration renewals, fuel and maintenance are not included in the total vehicle cost.
• Leases work differently from loans and are not covered by this calculator.
• The calculator cannot tell you which APR you will qualify for. That depends on your credit and the lender.

Frequently asked questions