What to enter
- Vehicle price
- The negotiated price of the vehicle before tax, fees, trade-in and down payment. Ask for an out-the-door price so you can see everything the dealer adds.
- Cash down payment
- Money you pay up front. It reduces the amount financed dollar for dollar.
- Trade-in value
- What the dealer or buyer will credit for your current vehicle. Use an actual offer, not a guess, since online estimates and dealer offers can differ.
- Amount still owed on the trade-in
- The payoff balance of your current loan. If it is more than the trade-in value, the shortfall (negative equity) is added to the new loan.
- Sales tax rate
- The combined state and local rate where you register the vehicle. Rules vary by state and locality, so confirm the rate and how it applies.
- Sales tax is charged on
- Choose “price minus trade-in value” if your state gives a tax credit for a trade-in, or “full vehicle price” if it does not. Many states credit the trade-in, but not all do.
- Title, registration and dealer fees
- Fees you plan to finance. Some are government charges and others are dealer charges that may be negotiable.
- Interest rate (APR) and loan term
- Use the rate from a pre-approval or the lender’s quote. Terms from 36 to 84 months are available.
How to read your results
The main number is the monthly payment. Read it together with three others: the amount financed, which includes tax, fees and any negative equity minus your down payment and trade-in credit; the total interest; and the total cost of the vehicle, which is the price plus tax, fees and interest. The last line, interest as a share of the vehicle price, shows how expensive the financing is relative to the car itself.
The term comparison table recomputes the same financed amount at 36, 48, 60, 72 and 84 months at your rate. It shows why the payment alone is a misleading way to judge a car: stretching the term lowers the payment but raises total interest, and it keeps you owing more than the vehicle is worth for longer.
How the amount financed and payment are found
Amount financed = price + sales tax + fees − down payment − (trade-in value − amount owed)The taxable amount is the price minus the trade-in value where the trade-in is credited, or the full price where it is not. Negative trade-in equity (amount owed above trade-in value) increases the amount financed.
The monthly payment uses the standard loan formula on the amount financed with the monthly rate (APR ÷ 12) and the number of months. Total cost of the vehicle is price plus sales tax plus fees plus total interest; the down payment and trade-in are part of what you pay for the vehicle, so they are not subtracted.
Worked example
A $32,000 vehicle, $3,000 down, 7% for 60 months
With no trade-in and 6.25% sales tax, tax is $2,000.00, and the amount financed is $31,000. The monthly payment is $613.84, total interest is $5,830, and the total cost of the vehicle, including tax and interest, is $39,830.
A longer or shorter term. At 72 months, the payment drops to $528.52 but interest rises to $7,053. At 48 months the payment is $742.33 and interest is $4,632.
A trade-in. An $8,000 trade-in with nothing owed cuts the taxable amount as well as the loan: tax falls to $1,500.00 and the amount financed to $22,500. If the state taxes the full price, tax stays at $2,000.00.
Negative equity. If that trade-in is worth $8,000 but $11,000 is still owed, the $3,000 gap is added to the new loan, raising the amount financed to $33,500 and the payment to $663.34.
Loan term, depreciation and negative equity
Vehicles lose value quickly, especially in the first years. A loan with a long term and little or no down payment can leave you owing more than the vehicle is worth for a large part of the loan. That is negative equity, and it matters if the vehicle is totaled, or if you want to sell or trade it before the loan is paid. Rolling negative equity into a new loan starts the next loan underwater as well.
A few practical habits reduce the risk: make a meaningful down payment, choose the shortest term whose payment you can afford comfortably, compare rates from a bank or credit union before visiting the dealer, and consider whether a less expensive vehicle would meet your needs. Ask about gap coverage if you must finance with little down, and check what it costs, since its price varies between dealers and insurers.
Also consider the total cost of owning the vehicle: insurance, fuel or charging, maintenance and registration are additional monthly costs that the loan payment does not show.
Sales tax and the new car-loan interest deduction
Trade-in tax treatment varies by state: sales tax on vehicles depends on the state and sometimes the county or city, and states differ on whether a trade-in reduces the taxable amount. The taxable amount shown here is an estimate based on the option you choose, and it may differ from your state’s actual rules or your dealer’s paperwork. Use the selector to reflect your state’s treatment, and verify the details with the department of motor vehicles or the dealer. Title, registration, dealer and documentation fees also vary by state, county and dealer, so use the amounts from your own paperwork rather than a typical figure.
For tax years 2025 through 2028, federal law allows a deduction of up to $10,000 a year for interest on certain new passenger vehicle loans, when the loan began after 2024, the vehicle had its final assembly in the United States and is for personal use, subject to an income phase-out. It applies to interest, not to the principal, and is claimed on the tax return. This calculator does not include it; the IRS page linked below has the current requirements.
Assumptions and limits
The estimate assumes a fixed rate, equal monthly payments and interest accruing monthly. It does not include insurance, warranties, add-on products, rebates or manufacturer incentives, and it treats the fees you enter as fully financed. Lease payments are calculated very differently and are not covered. For a general installment loan with an origination fee, use the loan calculator, and for a quick look at how a purchase fits your income, the take-home pay calculator shows what your paycheck leaves for a monthly payment.
Frequently asked questions
How much car can I afford?
A common guideline is to keep total vehicle costs, including the payment, insurance and fuel, to a modest share of take-home pay, and to choose a term that leaves you with positive equity quickly. Your own budget matters more than a rule. Try different prices and terms and compare the payment with your take-home pay.
Is a longer loan term a good idea?
It lowers the monthly payment but raises total interest and keeps you owing more than the car is worth for longer. Choose the shortest term you can comfortably afford.
What is negative equity?
It is owing more on a vehicle than the vehicle is worth. If you trade in a car with negative equity, the difference is usually added to the new loan.
Does the calculator include sales tax on the trade-in?
It offers two options. Pick “price minus trade-in value” if your state credits the trade-in against the tax, or “full vehicle price” if it does not.
Should I finance through the dealer or a bank?
Compare. Getting a pre-approval from a bank or credit union gives you a rate to measure the dealer’s offer against. The CFPB’s guidance on comparing auto loan offers is a good place to start.