Auto Loan Calculator — Free Car Payment Estimator

How to Use the Auto Loan Calculator

Our auto loan calculator accounts for all the factors that affect your true car purchase cost, including sales tax and trade-in credits that many simpler calculators miss. This gives you the most accurate monthly payment estimate before you visit the dealership.

1. Enter the vehicle price. Input the negotiated purchase price (not MSRP) of the car. This should be the out-the-door price before taxes. If you are still researching, use the average market price from Kelley Blue Book, Edmunds, or TrueCar for the specific make, model, and trim.
2. Set your down payment. Enter the cash you plan to pay upfront at the dealership. A larger down payment reduces your loan amount, monthly payment, and total interest. Aim for at least 10-20% of the vehicle price to avoid being underwater on the loan.
3. Add your trade-in value. If you are trading in a current vehicle, enter its fair market value. Research your car trade-in value on Kelley Blue Book or get quotes from services like Carvana and CarMax before negotiating with the dealer. The trade-in reduces both your loan amount and taxable amount in most states.
4. Enter your sales tax rate. Input the combined state and local sales tax rate for your area. This varies from 0% (Oregon, Montana) to over 10% in some states and cities. Sales tax is a significant cost; at 6.25% on a $35,000 vehicle, it adds $2,188 to your loan if financed.
5. Set the APR and loan term. Enter the interest rate from your pre-approved lender or dealer quote. Select the loan term (24 to 84 months). Compare different terms to see the trade-off between lower monthly payments and higher total interest.
6. Review your complete cost picture. The results show your monthly payment, loan amount (after down payment and trade-in), total interest, sales tax, and total out-of-pocket cost. The pie chart visualizes the proportion of principal, interest, tax, down payment, and trade-in.

Experiment with different scenarios: try increasing your down payment, shortening the term, or finding a lower APR to see how each change affects your monthly payment and total cost.

Auto Loan Payment Formula

The auto loan payment calculation uses the standard amortization formula, with the key addition of sales tax in the financing amount. Understanding this formula helps you evaluate dealer offers and negotiate effectively.

Where:

• Sales Tax = (Vehicle Price − Trade-In Value) × Tax Rate (in most states)
• M = Monthly payment
• r = Monthly interest rate (APR ÷ 12 ÷ 100)
• n = Total number of monthly payments

Worked Example

Calculate the payment for a $35,000 car with $5,000 down, $8,000 trade-in, 6.25% sales tax, 5.9% APR, 60-month term:

1. Taxable amount: $35,000 − $8,000 = $27,000
2. Sales tax: $27,000 × 0.0625 = $1,688
3. Loan amount: $35,000 + $1,688 − $5,000 − $8,000 = $23,688
4. Monthly rate: 5.9% ÷ 12 = 0.4917%
5. Monthly payment: $23,688 × [0.004917 × (1.004917)⁶⁰] / [(1.004917)⁶⁰ − 1] = $457
6. Total loan payments: $457 × 60 = $27,397
7. Total interest: $27,397 − $23,688 = $3,709
8. Total out-of-pocket: $5,000 (down) + $27,397 (payments) = $32,397

Notice that the total out-of-pocket cost ($32,397) is less than the vehicle price ($35,000) because the $8,000 trade-in covers the difference. Without the trade-in, you would pay $5,000 down plus $35,397 in payments ($40,397 total), which includes $5,397 in interest on the larger loan.

Practical Auto Loan Examples

These scenarios illustrate how different vehicle prices, loan terms, and financing options affect your monthly payment and total cost in realistic 2026 conditions.

Budget-Friendly Used Car Purchase

Maria is buying a 3-year-old certified pre-owned sedan for $22,000. She has $3,000 for a down payment and no trade-in. With a used car rate of 7.2% APR for 48 months and 6% sales tax ($1,320), her loan amount is $20,320. Her monthly payment is $488, and total interest is $3,112. Total out-of-pocket cost is $26,432 ($3,000 down + $23,432 in payments). If she chose 60 months instead, her payment drops to $404 but total interest jumps to $3,928, costing $816 more overall.

New Car with Trade-In

James is purchasing a new SUV for $42,000 and trading in his current vehicle valued at $12,000. With $5,000 cash down, 5.5% APR for 60 months, and 7% sales tax, his numbers are: taxable amount = $30,000, sales tax = $2,100, loan amount = $27,100 ($42,000 + $2,100 - $5,000 - $12,000). His monthly payment is $518, total interest is $3,982, and total out-of-pocket is $36,082. The $12,000 trade-in saved him both $840 in sales tax (tax on $12,000 at 7%) and significant interest on a smaller loan.

Manufacturer Incentive Rate vs Bank Rate

Sarah qualifies for two offers on a $38,000 new car: 1.9% APR from the manufacturer for 48 months, or $3,000 cash rebate with 5.5% APR from her credit union for 60 months. Option A (1.9%/48mo): payment of $824, total interest $1,550, total cost $39,550. Option B (rebate + 5.5%/60mo on $35,000): payment of $668, total interest $5,082, total cost $40,082 (after rebate). Option A saves $532 total despite the higher payment. The lower rate outweighs the rebate, although Option B has a lower monthly payment. She uses our calculator to confirm both scenarios before deciding.

Impact of Credit Score on Cost

Two buyers, Alex (780 credit score) and Jordan (640 credit score), both purchase $30,000 cars with $5,000 down for 60 months. Alex qualifies at 4.5% APR: monthly payment of $466, total interest $2,950. Jordan qualifies at 12.5% APR: monthly payment of $566, total interest $8,976. Jordan pays $6,026 more in interest over the life of the loan, the equivalent of paying an extra $100 per month for 5 years. This demonstrates why improving your credit score before buying can save thousands.

Auto Loan Tips and Car Buying Guide

Making smart financing decisions can save you thousands over the life of your auto loan. These strategies help you get the best deal and avoid common pitfalls.

Get Pre-Approved Before Visiting the Dealer

Getting pre-approved for an auto loan from your bank or credit union before visiting the dealership puts you in a stronger negotiating position. You already know your rate and budget, so you can focus on negotiating the vehicle price rather than the monthly payment. Dealers often try to negotiate based on monthly payment, which can obscure the total cost by stretching the term. With pre-approval in hand, you can tell the dealer "I have financing at 5.5%, can you beat it?" If the dealer can offer a lower rate through manufacturer financing, great. If not, you already have a competitive rate locked in.

Negotiate the Price, Not the Payment

Dealerships often ask "What monthly payment are you looking for?" and then adjust the term, down payment, and trade-in value to hit that number while maximizing their profit. Instead, negotiate the out-the-door price of the vehicle separately from the financing terms. Get the lowest price first, then discuss financing. This transparent approach prevents the common tactic of giving you a good price on the car while undervaluing your trade-in, or stretching your term to hit a target payment while costing you more in total interest.

Avoid Rolling Negative Equity Forward

If you owe more than your current car is worth (negative equity) and want to buy a new car, dealers may offer to "roll" the difference into your new loan. This is one of the most expensive mistakes in auto financing. For example, if you owe $18,000 on a car worth $14,000, the $4,000 negative equity gets added to your new loan. On a $35,000 new car, you would finance $39,000 plus tax. This almost guarantees you will be underwater on the new car too, creating a cycle of negative equity. Instead, continue paying your current loan until the balance is below the car value, or pay the difference in cash.

Consider Total Cost of Ownership

The monthly loan payment is just one part of car ownership costs. Factor in insurance (which varies significantly by model, age, and driver), fuel costs (compare MPG between options), maintenance and repairs (luxury and European brands typically cost more to maintain), depreciation (some brands hold value better than others), and registration fees. A cheaper car with higher insurance and repair costs may cost more overall than a slightly more expensive car with lower operating costs. Run the full numbers before committing.

Common Mistakes to Avoid

• Choosing a 72-84 month term to afford a more expensive car. If you need a 72+ month term to make the payment work, the car is too expensive for your budget. Long terms cost thousands more in interest and leave you underwater for most of the loan. Stick to 48-60 months maximum.
• Skipping the down payment. Zero-down auto loans immediately put you underwater because the car depreciates 20-30% in the first year. A down payment of 10-20% provides equity cushion and reduces interest costs. Even $2,000 to $3,000 makes a meaningful difference.
• Buying add-ons with dealer financing. Extended warranties, paint protection, fabric coating, and other dealer add-ons are often marked up 200-500% and rolled into your loan, adding interest on top of the inflated price. If you want these products, buy them separately for less.
• Focusing only on new cars. A 1-3 year old certified pre-owned vehicle provides most of the new-car experience at 20-30% less cost. The previous owner absorbed the steepest depreciation, and CPO programs include extended warranties and inspections. The interest rate may be slightly higher but the lower principal more than compensates.
• Not comparing rates from multiple lenders. Rates can vary 1-3% between lenders for the same borrower. Check your bank, credit union, online lenders, and the dealer. Even a 1% rate difference on a $25,000 loan saves approximately $700 over 60 months.