How a car loan payment is calculated
Your monthly payment depends on the amount financed, the APR and the term. The amount financed is the vehicle price minus your down payment and trade-in, plus sales tax and fees if you roll them into the loan.
- A = amount financed
- r = monthly rate = APR ÷ 12 ÷ 100
- n = number of monthly payments
Worked example
A $35,000 car with $5,000 down, 7% sales tax ($2,450) and $500 in fees rolled into the loan gives an amount financed of $32,950. At 7% APR for 60 months, the payment is about $652 a month and you pay about $6,200 in interest. Stretching the same loan to 84 months lowers the payment to about $497, but the interest rises to about $8,800.
Typical auto loan rates
Rates depend mostly on your credit score, whether the car is new or used, and the loan term. Borrowers with excellent credit often get new-car rates around 5% to 7%, while used-car loans and lower credit scores can mean rates of 10% to 20% or more. Dealer promotions sometimes offer 0% to 2.9% APR on new cars, usually in place of a cash rebate. Getting pre-approved by a bank or credit union before you visit the dealer gives you a rate to compare against.
Sales tax and trade-ins
Most states charge sales tax on the vehicle price minus the value of your trade-in, which can save you hundreds of dollars. A few states, including California, Virginia and Michigan (above a limit), tax the full price instead. Rates differ by state and county; see the sales tax calculator for your state's average rate.
How long should a car loan be?
- Shorter terms (36–60 months) cost far less interest and help you avoid owing more than the car is worth.
- Longer terms (72–84 months) lower the payment but increase the total cost, and you may be "upside down" on the loan for years because cars lose value quickly.
- A popular guideline is the 20/4/10 rule: put at least 20% down, finance for no more than 4 years, and keep total car costs below 10% of your gross income.
Frequently asked questions
How do I calculate my car payment?
Subtract your down payment and trade-in from the price, add sales tax and fees if you finance them, and apply the loan formula Payment = A × r ÷ (1 − (1 + r)^−n) with the monthly rate r and the number of months n. The calculator does this automatically.
What is the payment on a $35,000 car?
With $5,000 down, 7% sales tax and $500 fees financed, at 7% APR for 60 months the payment is about $652 a month. Over 72 months it is about $562.
Is sales tax included in a car loan?
It can be. Many buyers roll sales tax, title and registration fees into the loan; others pay them upfront. Tick or untick the option in the calculator to compare.
Does a trade-in reduce sales tax?
In most states, yes: tax is charged on the price minus the trade-in value. Some states, such as California, tax the full purchase price.
Is a 72-month or 84-month car loan a good idea?
It lowers the monthly payment but increases the total interest, and the car may be worth less than you owe for several years. A shorter loan is usually cheaper overall.
This calculator is for information only. Your lender's APR, fees and state tax rules determine your actual payment.