Auto Loan Calculator
A car payment is easy to calculate and easy to be misled by. This calculator works from the out-the-door price — including sales tax, dealer fees and registration — rather than the sticker, models the trade-in tax credit and any negative equity being rolled forward, and shows how long you would owe more than the car is worth.
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EstimateThis calculator provides estimates for educational and informational purposes only. It does not constitute financial, investment, legal, accounting, or tax advice. Results are based on the assumptions and information entered and may differ materially from actual outcomes. Tax rules and financial regulations can change. Consult an appropriately qualified professional for advice specific to your situation.
The tax rate used is a state-level general sales tax rate. Local taxes, vehicle-specific rates and excise taxes are not included, and trade-in credit rules differ by state. Confirm with your state DMV before relying on it.
- Out-the-door price, not sticker: tax and fees typically add 8%–12%.
- State sales tax rates built in, with clear warnings about what they do and do not include.
- Negative equity from a trade-in is modelled explicitly, because it is where car deals go wrong.
- Shows the months you would be underwater — the window gap insurance is designed for.
Negotiate the out-the-door price, not the payment
The most useful discipline in car buying is refusing to negotiate on the monthly payment.
A monthly payment has four inputs a dealer can adjust: price, trade-in value, term and rate. Move any of them and the payment moves. That means a dealer can meet almost any payment target without lowering the price at all — by stretching the term, by reducing the trade-in allowance, or by adjusting the financing.
The out-the-door price cannot be manipulated the same way. It is a single number: what you will pay in total to drive the car away, including every tax and fee.
| Component | Example on a $32,000 vehicle |
|---|---|
| Negotiated vehicle price | $32,000 |
| State sales tax at 6% | $1,920 |
| Dealer documentation fee | $700 |
| Title and registration | $400 |
| Out-the-door | $35,020 |
That is 9.4% above the number on the window, before any financing. Ask for the out-the-door figure in writing before discussing payments at all.
The full calculation this page runs is:
taxable amount = vehicle price
− trade-in value (where the state allows the credit)
− rebate (where the state taxes after the rebate)
sales tax = taxable amount × sales tax rate
out-the-door = vehicle price + sales tax + dealer fees + registration
trade-in equity = trade-in value − amount still owed on it
(negative equity is rolled into the new loan)
amount financed = out-the-door − down payment − rebate − trade-in equity
monthly payment = amount financed × [ i(1 + i)^n ] / [ (1 + i)^n − 1 ]
where i = APR ÷ 12 and n = term in months
Sales tax and the trade-in credit
Most states reduce the taxable amount by the value of a trade-in. On a $32,000 car with a $10,000 trade-in in a 6% state, that credit is worth $600 — you are taxed on $22,000 rather than $32,000.
Several states do not allow this, California being the most commonly cited. Because the rules genuinely differ, this calculator makes it a checkbox rather than assuming an answer, and the note beside it says to verify.
Three further cautions about the tax figure:
- The rate here is state-level only. County, city and transit district taxes are common and can add two or three percentage points. The combined rate at your address is what you will actually pay.
- Some states tax vehicles differently from general retail, through a separate excise tax, a flat fee, or a rate that differs from the general sales tax rate.
- Rebate treatment varies. Some states calculate tax before a manufacturer rebate is applied, others after. The Advanced section has a checkbox for this.
Your state DMV or department of revenue publishes the actual rules. It is worth five minutes on a purchase of this size.
Negative equity: the most expensive mistake in car buying
If you owe more on your current car than it is worth, that shortfall does not disappear when you trade it in. It is added to the new loan.
Trade in a car worth $10,000 with $14,000 still owing, and $4,000 of old debt joins the new financing. You now owe $4,000 more than the new car is worth on day one, and you pay interest on that $4,000 for the length of the new loan.
The trap is that this is often invisible in the conversation. The dealer quotes a payment that works, the paperwork absorbs the shortfall, and the buyer does not realise they have carried debt forward. Two or three years later they trade again, still underwater, and the process repeats with a larger shortfall each time.
Enter the amount still owed on your trade-in above and the calculator flags this explicitly, shows how much old debt is being rolled forward, and includes the interest cost of carrying it.
Depreciation and being underwater
A new car loses value fastest in its first years. A loan amortizes slowly at first. For a period, the loan balance exceeds the vehicle's value — you are "underwater" or "upside down".
This matters in exactly two situations, and both are ones you cannot schedule:
- A total loss. Your insurer pays the vehicle's actual cash value, not your loan balance. If the car is worth $22,000 and you owe $26,000, you owe the lender $4,000 for a car you no longer have. Gap insurance covers precisely this difference, and it is worth its cost specifically during the underwater window.
- Needing to sell. You would have to bring cash to close the loan.
The value-versus-balance chart in your results shows the window for your deal. Three things shorten it: a larger down payment, a shorter term, and buying a car that has already taken its steepest depreciation — a two or three-year-old vehicle rather than a new one.
Depreciation itself is modelled at a flat annual rate here, which is a simplification. Real depreciation is steepest in year one and flattens afterwards, and it varies substantially by make, model, mileage and condition. Treat the curve as indicative rather than precise.
Long loan terms
Seventy-two and eighty-four month car loans have become common, and they are the clearest example of a lower payment that is not a better deal.
| Term on $31,000 at 7.4% | Payment | Total interest |
|---|---|---|
| 36 months | $963 | $3,663 |
| 48 months | $748 | $4,904 |
| 60 months | $620 | $6,182 |
| 72 months | $535 | $7,499 |
| 84 months | $475 | $8,853 |
Extending from 36 to 84 months halves the payment and roughly doubles the interest. It also keeps you underwater for far longer, and leaves you making payments on a seven-year-old car that may be needing repairs.
A reasonable test: if the payment only works at 72 or 84 months, the honest conclusion is usually that the car is too expensive rather than that the term is too short.
Common mistakes
Negotiating the payment. Covered above, and the root of most of the others.
Arranging financing at the dealer without a comparison. Getting a pre-approval from a credit union or bank first gives you a rate to beat. Dealers can often beat it — and sometimes mark up the rate they were offered by the lender — but you cannot tell without a benchmark.
Rolling negative equity forward. If you are underwater on a trade, the cheapest option is usually to keep the car until you are not.
Bundling add-ons into the loan. Extended warranties, paint protection and similar products are usually high-margin, are almost always negotiable, and financing them means paying interest on them for years. Most can be bought later if you decide you want them.
Ignoring the running costs. Insurance, fuel, maintenance, tyres and registration are frequently comparable to the loan payment over the life of the car, and insurance in particular varies enormously by model — worth getting a quote before buying, not after.
Frequently asked questions
Enough to avoid being significantly underwater, which for a new car generally means a meaningful down payment because of first-year depreciation. Twenty percent is a common guideline for new vehicles and around ten percent for used ones. The value-versus-balance chart in your results shows what your down payment does to the underwater window, which is a more useful test than a rule of thumb.
In most states, yes — you are taxed on the difference between the purchase price and the trade-in value. Several states, including California, do not allow this. Because the rules genuinely differ, the calculator makes it a setting rather than assuming. Check with your state DMV or department of revenue.
Gap insurance covers the difference between what your insurer pays if the car is totalled — its actual cash value — and what you still owe. It matters only while you owe more than the car is worth. If your results show a long underwater period, gap coverage is worth considering for that window; if the loan stays below the vehicle's value throughout, it is not needed. It is usually cheaper from your own insurer than from the dealer.
Compare total cost both ways. Zero percent financing on the full price against a lower price financed at a market rate can go either way, and the answer depends on the rebate size, the rate you would otherwise get and the term. Run the calculator twice — once at 0% on the full price, once at your bank's rate on the price less the rebate — and compare the total cost figures. Note that manufacturer 0% offers usually require excellent credit and often exclude the rebate.
The shortest term whose payment you can comfortably meet. Sixty months is a common upper bound for new vehicles; many buyers are better served by 36 or 48. Long terms lower the payment and raise the total cost substantially, keep you underwater longer, and often leave you paying for a car that has started to need work.
Used is generally cheaper in total cost of ownership, because the steepest depreciation has already been absorbed by the first owner. Against that, used cars usually carry slightly higher interest rates, shorter or no remaining warranty, and more maintenance uncertainty. A two-to-four-year-old vehicle with service records is often the sweet spot, though the gap narrows when new-car incentives are aggressive.