Car Loan Calculator
Auto financing allows buyers to acquire new or used vehicles by spreading the purchase price over loan terms ranging from 24 to 84 months. Calculating an accurate car loan payment requires accounting for cash down payments, vehicle trade-in credits, state sales tax, and annual interest rates.
How Auto Sales Tax & Trade-Ins Work
In most states, trading in an existing vehicle reduces your taxable purchase price. If you purchase a $35,000 car and trade in a vehicle valued at $10,000, you only pay sales tax on the remaining $25,000 net difference. This tax credit saves hundreds of dollars upfront.
The Danger of 72-Month and 84-Month Auto Loans
While 72 and 84-month loans lower your monthly payment, they significantly increase total interest charges and leave borrowers "underwater" (owing more on the loan than the depreciated car is worth) for years.
Worked Numeric Example
Suppose you're financing a $32,000 new vehicle with a $4,000 down payment, at 7.2% APR over 60 months:
- Loan Principal: $32,000 − $4,000 = $28,000
- Monthly Payment: ≈ $555.65/mo
- Total Interest Paid (60 Mos): ≈ $5,339
- 72-Month Payment: ≈ $476.51/mo (Total Interest: ≈ $6,309)
- Takeaway: Stretching the loan to 72 months drops monthly outflow by $79.14/mo but costs ≈ $970 more in total interest.
How Vehicle Depreciation Impacts Loan Value
New vehicles lose approximately 20% of their market value during the first year of ownership and roughly 15% to 20% each subsequent year. Borrowing with a low down payment on a long 72-month loan creates a severe negative equity gap where your vehicle's market value drops faster than your principal loan balance declines. Utilizing cash down payments and trading in equity helps protect borrowers against negative vehicle equity.
Key Model Assumptions & Practical Limitations
- Sales Tax Basis: Calculated on purchase price minus trade-in credit in supported states.
- Exclusion of Registration Fees: Title, registration, and dealer documentation fees ($200–$800) vary by state.
- Fixed Simple Interest: Auto loans utilize simple interest computed on declining principal.
Frequently Asked Questions
No — it calculates payments based on the amount financed. If tax or fees are rolled into your loan, add them to the vehicle price before calculating for an accurate payment.
Well-qualified buyers often see 5–8% APR on new vehicles; used vehicle loans and subprime borrowers can see notably higher rates, sometimes exceeding 15%.
It lowers your monthly payment but increases total interest paid and extends the period you may owe more than the car is worth. Worth running the total-cost comparison first.
It depends — dealers sometimes offer promotional low-APR financing, while banks and credit unions often have competitive rates too. Getting pre-approved before visiting the dealership gives you a rate to compare against.
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