Short answer: enter the vehicle price, trade-in, down payment, tax rate, fees, APR, and term above. The calculator shows your amount financed, monthly payment, and total interest — plus a 60-vs-72-month comparison so you can see what a longer term really costs.
How to use this calculator
- Vehicle price — the negotiated selling price (sticker price minus any discounts).
- Trade-in value — what the dealer gives you for your old car. In many states this also reduces the taxable amount.
- Down payment — cash you pay upfront. More down means less financed and less interest.
- Sales tax rate — your state/local rate. Applied to the price after trade-in credit in most states.
- Fees — title, registration, and documentation fees. Dealer doc fees are often negotiable.
- APR — your loan’s annual rate. Get preapproved before visiting the dealer so you know your real rate.
- Loan term — 60 months is the traditional sweet spot; 72 and 84 exist but cost much more in interest.
Results update instantly. Everything runs in your browser — your numbers never leave your device.
How the math works
Your monthly payment is computed on the amount financed, not the sticker price:
Amount financed = (price − trade-in) − down payment + sales tax + fees
Then the standard amortization formula applies:
M = P × r(1+r)ⁿ / ((1+r)ⁿ − 1)
Most US auto loans use simple interest: each month’s interest = remaining balance × (APR ÷ 12), and your payment covers interest first, then principal. Unlike some mortgages, there’s generally no escrow — you pay insurance separately.
Two practical consequences of simple interest:
- Paying extra principal early saves real interest, because next month’s interest is computed on the smaller balance.
- Most auto loans have no prepayment penalty (check your contract to be sure), so extra payments are a clean win.
A worked example
Say you buy a $32,000 car with a $4,000 trade-in, $3,000 down, 6% sales tax, $500 in fees, at 7% APR:
- Taxable amount: $32,000 − $4,000 = $28,000 → tax = $1,680
- Amount financed: $28,000 − $3,000 + $1,680 + $500 = $27,180
| 60 months | 72 months | |
|---|---|---|
| Monthly payment | $538.20 | $463.39 |
| Total interest | $5,111.79 | $6,184.22 |
The 72-month loan saves about $75/month but costs an extra $1,072 in interest — and keeps you in debt a full year longer, deep in the period when repair costs rise and the car is worth the least. Stretch the term only if the monthly payment is genuinely unaffordable otherwise, not to buy more car.
The down payment question
How much should you put down? The classic guidance is 20%, and the math backs it up for one big reason: depreciation. New cars lose roughly 20% of their value in the first year. If you finance 100% of the price, you owe more than the car is worth from day one — that’s negative equity (being “underwater”).
With 20% down, your loan starts roughly in line with the car’s value, so you stay above water. Our full guide runs the numbers: How Much Should You Put Down on a Car?.
A trade-in counts toward this the same as cash — $4,000 of trade-in value is $4,000 you don’t finance. But know your trade’s real value (check two or three independent price guides) before accepting the dealer’s number; undervalued trade-ins are a quiet profit center.
Why loan term matters more than rate (sometimes)
Shoppers obsess over APR but ignore term — yet term often moves the total cost more. Dropping from 8% to 6% APR on a $27,180, 60-month loan saves roughly $1,700 in interest. Extending from 60 to 72 months at the same rate adds roughly $1,070 — and 84-month terms are worse still.
The danger zone is the long loan on a depreciating asset: at 72–84 months, the car’s value falls faster than the balance for years. If the car is totaled or you need to sell, you could owe thousands more than it’s worth — gap insurance exists precisely for this, and it’s worth considering on long terms or small down payments.
Our comparison guide: 96-Month Auto Loan — The Real Cost.
Get preapproved before you shop
Walking into a dealership with a preapproved loan from your bank or credit union changes the negotiation:
- You know your real rate. The dealer’s finance office can’t mark it up quietly.
- You negotiate price, not payment. “Can you do $31,000?” beats “Can you get me to $500/month?” — the latter invites term-stretching tricks.
- You can still take dealer financing if they beat your preapproved rate. Let them compete; you win either way.
Credit unions frequently offer the lowest auto rates — check at least one before accepting any offer. And keep the loan term identical when comparing rates: a lower APR on a longer term can still cost more overall.
One more preapproval tip: ask for the “out-the-door” price in writing before discussing financing at all. Some dealers offset a great rate with inflated fees or add-ons (extended warranties, paint protection, VIN etching) slipped into the paperwork. An out-the-door number — price plus tax, title, and all fees — makes competing offers genuinely comparable and exposes padding.
Should you lease instead of buying?
Leasing isn’t a loan — it’s a long-term rental with mileage limits (typically 10,000–12,000 miles/year) and wear-and-tear charges. Leasing usually means lower monthly payments than buying the same car, but you build no equity and face a perpetual payment cycle.
Leasing can make sense if: you drive predictable low miles, want a new car every 2–3 years, and can deduct lease payments as a business expense. Buying wins if: you drive a lot, keep cars long-term, or hate mileage anxiety. Run the buy numbers in the calculator above first — most people who “can’t afford to buy” are shopping too much car, not facing a lease-vs-buy problem.
How auto loans differ from mortgages
- No escrow: you handle insurance and (usually no) property tax yourself.
- Faster depreciation: houses usually appreciate; cars almost never do. Long terms are riskier.
- Simpler payoff: most auto loans have no prepayment penalty, and interest is simple rather than the daily-compounding structures common in credit cards.
- Shorter timelines: 5–7 years versus 15–30, so rate differences compound less dramatically — but still matter.
For the full amortization mechanics (identical math, longer horizon), see our Loan Amortization Calculator.
What this calculator doesn’t do
- It doesn’t include ongoing ownership costs: insurance, fuel/charging, maintenance, and repairs.
- Tax treatment varies by state — some states tax the full price before trade-in credit, a few have no sales tax at all. Confirm your state’s rule.
- It assumes a fixed APR and fixed payment; it doesn’t model variable-rate or balloon auto loans.
- It is an educational planning tool, not financial advice.
Frequently asked questions
How much car can I afford?
A widely used guideline: keep total car expenses (payment, insurance, fuel, maintenance) under 15–20% of take-home pay, and the payment alone under about 10–15%. Enter your target monthly payment in the calculator above and adjust the price until it fits — then check the total interest before falling in love with the car.
Is a 72-month car loan bad?
Not automatically, but it’s expensive: on a typical $27,000 loan at 7%, 72 months costs about $1,070 more in interest than 60 months and keeps you underwater longer as the car depreciates. It’s reasonable when the alternative is no reliable car — it’s a poor way to afford more car than the 60-month payment allows.
Should I put money down or keep cash for emergencies?
Both matter. Never drain your emergency fund for a down payment — but financing 100% guarantees negative equity from day one. A practical middle ground: put down 10–20% while keeping at least a small emergency buffer intact.
Does paying extra on a car loan save interest?
Yes. Most US auto loans are simple-interest with no prepayment penalty, so every extra dollar goes straight to principal and reduces all future interest charges. Even rounding your payment up to the next $50 shortens the loan noticeably.
What is negative equity on a car loan?
Owing more than the car is worth — common with small down payments and long terms because cars depreciate fast. It traps you: you can’t sell or trade in without paying the difference out of pocket. Bigger down payments and shorter terms are the prevention.
Will getting preapproved hurt my credit score?
A single auto-loan inquiry causes a small, temporary dip. Multiple auto-loan inquiries within a short window (typically 14–45 days depending on the scoring model) are treated as one inquiry for rate shopping — so compare lenders freely within a couple of weeks.
Should I buy gap insurance?
Consider it if your down payment is under 20% or your term is 72+ months — exactly the situations where negative equity is likely. It’s often far cheaper through your insurer or credit union than through the dealer.
Related calculators
- Loan Amortization Calculator — full payment schedule for any installment loan
- Free Financial Calculators — every PayoffCalc tool in one place
Methodology reviewed September 2026. Payments computed with the standard US simple-interest amortization formula on the amount financed (price − trade-in − down + tax + fees). This page is educational content, not financial advice.