About the Auto Loan Calculator
Securing an auto loan is the most common way motorists purchase new and pre-owned vehicles. This Auto Loan Calculator factors in all critical transaction variables—including trade-in allowances, cash down payments, state sales tax, and APR—to compute your exact monthly payment and total finance charges.
How to Use This Calculator
- 1Enter the vehicle’s agreed purchase price (before taxes and incentives).
- 2Input your cash down payment and the trade-in allowance for your current vehicle.
- 3Enter the annual interest rate (APR) and select your loan term (36, 48, 60, or 72 months).
- 4Include your local sales tax rate to view total financed amount and out-of-pocket expenses.
Formula & Calculation Methodology
Auto loans use standard fixed-term amortization: Monthly Payment = Loan Amount × [r(1+r)ⁿ] / [(1+r)ⁿ - 1], where r is the monthly interest rate and n is the total number of monthly payments.
Worked Example: Financing a $35,000 Vehicle with $5,000 Down and $3,000 Trade-In
Scenario: A car buyer negotiates a $35,000 vehicle purchase. They pay $5,000 down in cash, receive $3,000 trade-in credit, face 7% sales tax on the net difference ($32,000 taxable), and borrow for 60 months at 6.0% APR.
Calculate sales tax on difference: ($35,000 - $3,000) × 0.07
$2,240 sales tax
Calculate net amount financed: $35,000 + $2,240 (tax) - $5,000 (down) - $3,000 (trade-in)
$29,240 loan principal
Calculate monthly payment (60 months @ 6.0%): $29,240 × [0.005 × (1.005)⁶⁰] ÷ [(1.005)⁶⁰ - 1]
$565.28 / month
Calculate total interest charges: ($565.28 × 60) - $29,240
$4,676.80 total interest
Conclusion: Monthly payment is $565.28. Total payments across 5 years equal $33,916.80, with $4,676.80 in total interest paid.
Assumptions & Practical Limitations
- Most US states allow a sales tax credit on trade-ins (you only pay tax on the difference between the new car and your trade-in). A few states (such as California and Virginia) tax the full vehicle price.
- Dealer documentation fees, title, and registration fees are not included automatically and should be added to the purchase price if financed.
Frequently Asked Questions
Financial experts generally advise keeping auto loans to 60 months (5 years) or less for new vehicles, and 36 to 48 months for used cars, to avoid becoming "upside-down" or owing more than the car is worth.