Auto Loan Calculator
Monthly payment $715.22.
You are rolling $2,000 of negative equity into this loan.
- Your trade is worth $8,000 but you still owe $10,000 on it. The difference does not disappear — it is added to the new loan.
- That means you start the new loan already owing more than the car is worth, which usually keeps you underwater for most of the term. Consider gap insurance, a larger down payment, or keeping the current car until the old loan is closer to paid off.
| Building the loan | Amount |
|---|---|
| Vehicle price | $35,000 |
| Sales tax 6% on $27,000 | + $1,620.00 |
| Fees | + $500.00 |
| Out-the-door price | $37,120 |
| Down payment | − $3,000.00 |
| Trade equity $8,000 value − $10,000 owed | + $2,000.00 |
| Amount financed | $36,120 |
| Monthly payment 5 yrs at 7% | $715.22 |
| Total interest | $6,793 |
| Total of payments | $42,913 |
| Year | Principal | Interest | Balance |
|---|---|---|---|
| 1 | $6,252 | $2,330 | $29,868 |
| 2 | $6,704 | $1,878 | $23,163 |
| 3 | $7,189 | $1,394 | $15,974 |
| 4 | $7,709 | $874 | $8,266 |
| 5 | $8,266 | $317 | $0 |
The amount financed is the out-the-door price minus your down payment and trade equity — not the sticker price. Two things people miss: sales tax is usually financed, adding thousands to the loan, and negative equity on a trade is added to the new loan rather than subtracted from it. Most US states give a tax credit for the trade-in's full allowance, so tax is charged on the price difference — a handful (including California) tax the full price, which is what the toggle is for. Not included: extended warranties, gap insurance, or dealer add-ons, all of which are financed at the same rate and are worth pricing separately. Check whether your loan has any prepayment penalty; most do not, and paying a little extra each month shortens the term meaningfully. Interest rate here is the APR, which is what the lender must disclose.
Calculate your real auto loan payment — including sales tax, fees, and trade-in equity — with a full amortization schedule.
How to use this calculator
- Enter the negotiated vehicle price — before tax, not the monthly payment the dealer leads with.
- Add your down payment, and the trade-in's value and remaining loan balance separately. Those two are what reveal your real equity.
- Set your sales tax rate and whether your state credits the trade-in against it.
- Add fees, your APR, and the term.
The formula
Amount financed = Price + Sales tax + Fees − Down payment − Trade equity
Trade equity = Trade value − Payoff (negative equity adds to the loan) · Payment = P × r × (1+r)ⁿ ÷ ((1+r)ⁿ − 1)
Worked example — $35,000 car with an underwater trade
Trade worth $8,000 with $10,000 still owed, $3,000 down, 6% sales tax, $500 in fees, 7% APR over 60 months.
- Trade equity: 8,000 − 10,000 = −$2,000
- Taxable amount: 35,000 − 8,000 = $27,000
- Sales tax: 6% = $1,620
- Out-the-door: 35,000 + 1,620 + 500 = $37,120
- Amount financed: 37,120 − 3,000 + 2,000 = $36,120
- Monthly payment: $715
Note that the amount financed is higher than the car's price. A $3,000 down payment did not reduce the loan below the sticker — sales tax, fees, and the negative equity more than absorbed it. That is the situation this calculator exists to make visible.
Negative equity: the part dealers gloss over
When your trade is worth less than you owe on it, the dealer still takes the car and still pays off your old lender. The shortfall does not vanish — it is added to your new loan. You drive away in a $35,000 car owing $36,120 on it.
The consequences compound. You are underwater from day one, so you stay underwater longer. If the car is written off in an accident, insurance pays what the car is worth, not what you owe, and you are left paying the difference on a car you no longer have. And if you trade again before the loan is paid down, the same problem rolls forward, larger.
The alternatives are unglamorous but real: keep the current car until the loan is closer to paid off, make a larger down payment to cover the shortfall in cash, or buy a cheaper car. Gap insurance protects against the write-off scenario but does nothing about the underlying arithmetic.
What the term does to the total
On the $36,120 financed above at 7%:
| Term | Monthly payment | Total interest |
|---|---|---|
| 36 months | $1,115 | $4,030 |
| 48 months | $865 | $5,397 |
| 60 months | $715 | $6,793 |
| 72 months | $616 | $8,218 |
| 84 months | $545 | $9,673 |
Stretching from 60 to 84 months saves $170 a month and costs an extra $2,900 in interest — while the car continues depreciating on its own schedule, indifferent to your loan term. The gap between what you owe and what the car is worth is widest and lasts longest on the longest terms.
Common mistakes to avoid
- Negotiating the monthly payment instead of the price. A payment can be made to hit any number by extending the term. Negotiate the out-the-door price, then discuss financing.
- Forgetting tax and fees are financed. On a $35,000 car that is often $2,000 or more added to the loan.
- Treating trade-in value as a down payment. Only the equity counts, and it can be negative.
- Taking 0% without pricing the rebate. They are usually alternatives, not both.
- Financing add-ons at the loan rate. An extended warranty rolled into a 7-year loan costs far more than its sticker price.
How we calculate this
The amount financed is vehicle price + sales tax + fees − down payment − trade equity, where trade equity is the dealer's allowance minus what you still owe. Negative equity therefore increases the amount financed rather than reducing it. Sales tax is charged on the price less the trade-in allowance by default, which is how most US states treat it — the toggle switches to taxing the full price for the states that do. The payment is the standard fully-amortizing monthly payment, and the schedule is generated month by month, summarised by year.
Sources
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Frequently asked questions
How do I calculate an auto loan payment?
Work out the amount financed first, then apply the standard amortizing payment formula. The amount financed is the vehicle price plus sales tax and fees, minus your down payment and trade-in equity. Applying the payment formula to the sticker price alone understates the payment badly, because tax and fees are usually financed too.
Does the trade-in reduce my sales tax?
In most US states, yes — you pay sales tax on the price difference rather than the full price. Trading a car worth $8,000 against a $35,000 purchase means tax on $27,000, which at 6% saves $480. A handful of states, including California, Michigan in part, and Virginia, tax the full purchase price regardless. The toggle in the calculator switches between the two.
What happens to negative equity when I trade a car in?
It gets added to the new loan. If your trade is worth $8,000 and you still owe $10,000, that $2,000 gap does not disappear — the dealer pays off the old loan and rolls the shortfall into the new financing. You then start the new loan already owing more than the car is worth, which usually keeps you underwater for most of the term.
What is the amount financed?
What you actually borrow: vehicle price + sales tax + fees − down payment − trade equity. It is almost always higher than the car's price once tax and fees are counted, and higher still if you are rolling negative equity in. This is the figure the interest rate applies to, not the sticker price.
Is a 72 or 84 month car loan a bad idea?
It lowers the payment and raises almost everything else. On a $36,000 loan at 7%, 60 months costs about $6,800 in interest while 84 months costs about $9,673 — and cars depreciate far faster than a long loan pays down, so you spend most of the term underwater. If the only way the payment fits is a 7-year term, the honest read is that the car is too expensive.
How much should I put down on a car?
20% on a new car is the traditional guidance, and it exists for a specific reason: new cars lose roughly 20% of their value in the first year, so a 20% down payment keeps you from going underwater immediately. On a used car, 10% is a reasonable target since the steepest depreciation has already happened.
Should I take the dealer financing or the rebate?
Compare them properly rather than assuming. A 0% offer sounds unbeatable but often replaces a cash rebate worth thousands. Run the numbers both ways: 0% on the full price against your credit union's rate on the price minus the rebate. On a shorter term the rebate frequently wins; on a long term the 0% usually does.
What fees should I expect on a car purchase?
Documentation fees (capped by law in some states, unlimited in others), title and registration, and any dealer add-ons. Doc fees range from under $100 to over $700 depending on the state. Title and registration are set by your DMV and are not negotiable. Everything else — paint protection, VIN etching, nitrogen tyres — is, and is worth declining.