How is a car payment calculated?

From the amount financed, not the price. Take the vehicle price, add sales tax and dealer fees, then subtract the trade-in allowance and your cash deposit. The result is amortised over the term at the loan rate using the standard payment formula. On a $35,000 car with $5,000 traded in and $3,000 down at 7.2% over five years, that is $29,800 financed and $592.89 a month.

Does a trade-in reduce the sales tax I pay?

In most states, yes, tax is charged on the price less the trade-in allowance, so a $5,000 trade-in at a 7% rate saves $350 of tax on top of the $5,000 itself. A few states, including California and Virginia, tax the full purchase price regardless. Use the toggle to switch between the two and the calculator will show what the credit is worth.

Is a longer car loan a bad idea?

It lowers the payment and raises the total interest, which is the obvious trade. The less obvious problem is depreciation: a car loses value faster than a 72- or 84-month loan pays down principal, so you can spend years owing more than the car is worth. If you then need to sell or total the car, you owe the difference in cash.

Should I take the 0% financing or the cash rebate?

They are usually alternatives, not both. The honest comparison is the interest you would pay at the normal rate on the smaller, rebated price against zero interest on the full price. Run this calculator twice, once at 0% with the full price, once at the rate you would otherwise get with the price reduced by the rebate, and compare the total cost figures. The loan calculator does the same comparison without the tax and trade-in machinery if you prefer it plain.

What fees should I include?

Documentation, title and registration at minimum. If the dealer has quoted gap insurance, an extended warranty, or any protection package you intend to buy, add those too, they are financed at the same rate as the car and are frequently the most negotiable part of the deal.

Why is the dealer’s payment higher than this?

Usually add-ons in the finance office, a higher rate than you assumed, or a fee you did not know about. Ask for the amount financed and the APR in writing and put both into this calculator; if the payment still does not match, something is in the loan that you have not been told about. Once the loan exists, paying it down early is worth comparing against investing.

Auto Loan Calculator

This auto loan calculator works the payment from what you actually finance, which is not the sticker price. Sales tax and dealer fees are added, your trade-in and deposit come off, and in most states the trade-in cuts the tax bill as well.

Example numbers

The answerfrom an example

This car costs $592.89 a month for 5 years.

Worked on $35,000 car, $5,000 trade-in, $3,000 down, 7.20% over 5 years. Change anything below to use yours.

Amount financed: $29,800
Sales tax: $2,100
Total interest: $5,774

The figures behind it

Amount financed: $29,800; Price plus tax and fees, less your trade-in and down payment.
Sales tax: $2,100; Charged on $30,000, the price less the trade-in.
Total interest: $5,774; Over 5 years at the rate you entered.
Paid up front: $8,000; Cash down payment plus the trade-in allowance.
Total cost of the car: $43,574; Price, tax, fees and interest together.
Tax saved by trading in: $350; On top of the trade-in allowance itself, because it lowered the taxable price.

What the car costs in total$43,574

80%

13%

Vehicle price$35,000
Sales tax$2,100
Fees$700
InterestPaid to the lender, not the dealer.$5,774

What you still owe, and what it has cost

Years from today

Balance remainingInterest paid to date

Payment scheduleShow

The table scrolls sideways

Month	Payment	Interest	Principal	Balance
1	$593	$179	$414	$29,386
2	$593	$176	$417	$28,969
3	$593	$174	$419	$28,550
4	$593	$171	$422	$28,129
5	$593	$169	$424	$27,705
6	$593	$166	$427	$27,278
7	$593	$164	$429	$26,849
8	$593	$161	$432	$26,417
9	$593	$159	$434	$25,982
10	$593	$156	$437	$25,545
11	$593	$153	$440	$25,106
12	$593	$151	$442	$24,664
13	$593	$148	$445	$24,219
14	$593	$145	$448	$23,771
15	$593	$143	$450	$23,321
16	$593	$140	$453	$22,868
17	$593	$137	$456	$22,412
18	$593	$134	$458	$21,954
19	$593	$132	$461	$21,493
20	$593	$129	$464	$21,029
21	$593	$126	$467	$20,562
22	$593	$123	$470	$20,092
23	$593	$121	$472	$19,620
24	$593	$118	$475	$19,145
25	$593	$115	$478	$18,667
26	$593	$112	$481	$18,186
27	$593	$109	$484	$17,702
28	$593	$106	$487	$17,216
29	$593	$103	$490	$16,726
30	$593	$100	$493	$16,233
31	$593	$97	$495	$15,738
32	$593	$94	$498	$15,240
33	$593	$91	$501	$14,738
34	$593	$88	$504	$14,234
35	$593	$85	$507	$13,726
36	$593	$82	$511	$13,216
37	$593	$79	$514	$12,702
38	$593	$76	$517	$12,185
39	$593	$73	$520	$11,666
40	$593	$70	$523	$11,143
41	$593	$67	$526	$10,617
42	$593	$64	$529	$10,087
43	$593	$61	$532	$9,555
44	$593	$57	$536	$9,019
45	$593	$54	$539	$8,481
46	$593	$51	$542	$7,939
47	$593	$48	$545	$7,393
48	$593	$44	$549	$6,845
49	$593	$41	$552	$6,293
50	$593	$38	$555	$5,738
51	$593	$34	$558	$5,180
52	$593	$31	$562	$4,618
53	$593	$28	$565	$4,053
54	$593	$24	$569	$3,484
55	$593	$21	$572	$2,912
56	$593	$17	$575	$2,337
57	$593	$14	$579	$1,758
58	$593	$11	$582	$1,175
59	$593	$7	$586	$589
60	$593	$4	$589	$0

What this result assumes

Tax and fees are financed along with the vehicle, which is what most dealers do unless you ask to pay them in cash.
The trade-in is treated as money you put into the car, so it reduces what you borrow but not what the car costs you.
Depreciation is not modelled. A car loses value faster than this loan amortises in its first year or two, which is how buyers end up owing more than the car is worth.

Methodology

Reviewed August 31, 2026

The amount financed is not the price

A car loan is written against the amount financed, and getting to that figure takes four adjustments to the sticker price. Sales tax and dealer fees are added, because both are normally rolled into the loan rather than paid in cash. The trade-in allowance and your cash deposit are subtracted. What is left is the principal the lender amortises.

On the default scenario here that is $29,800 against a $35,000 car — but it would be $27,000 if you ignored tax and fees, and the payment would come out about $80 a month too low. That gap is why a calculator that asks only for price and down payment gives an answer the dealer will not match.

The trade-in is treated as money you put into the car, not as a discount on what the car costs. It lowers what you borrow and therefore what you pay in interest, but the total cost figure still counts the full price, because that is what you are spending.

Sales tax and the trade-in credit

Most US states charge sales tax on the price net of the trade-in. A $35,000 car with a $5,000 trade-in is taxed as a $30,000 purchase, so at 7% you pay $2,100 rather than $2,450. The trade-in is quietly worth $5,350, not $5,000.

A minority of states — California and Virginia among them — tax the full purchase price regardless of any trade-in. The toggle in the inputs switches between the two treatments, and the calculator shows the resulting tax saving as its own figure so you can see what the credit is worth where you live.

Rates vary by locality as well as by state, and several states charge tax at your home address rather than the dealer’s. Enter the combined rate that applies to you; a state-level figure will usually be too low.

The loan

The payment is the standard amortization formula, M = P × [r(1 + r)ⁿ] ÷ [(1 + r)ⁿ − 1], with r the annual rate divided by twelve. Interest is rounded to the cent each month, as a lender would, and the final payment absorbs the rounding remainder so the balance lands on exactly zero.

A 0% promotional rate is handled separately, since the formula is undefined there: the principal is simply divided across the term. Note that a manufacturer’s 0% offer is usually an alternative to a cash rebate rather than an addition to it, so the true cost of taking it is the rebate you gave up — something no payment calculator can see.

The rate you enter is treated as the note rate. On a car loan the quoted APR is usually very close, because most of the financed fees are already in the principal here.

What this does not model

Depreciation, which is the thing that actually goes wrong with car loans. A new car loses a large share of its value in the first two years while the loan amortises slowly, so on a long term with a small deposit you can owe more than the car is worth for years. The calculator will warn about terms over 72 months but it does not project the car’s value.

Gap insurance, extended warranties, paint protection and other finance-office add-ons. These are frequently financed and can add thousands; if you are quoted them, add them to the fees field to see what they really cost over the term.

Any early payoff. Most US car loans use simple interest and can be paid down early without penalty, which the schedule here would show if you paid more — but this calculator holds the payment level for the whole term. Whether overpaying beats banking the money is worked out in savings versus debt paydown.

Assumptions

Sales tax and dealer fees are financed rather than paid in cash.
The interest rate is fixed for the whole term.
The trade-in has no outstanding loan against it. Negative equity rolled into a new loan is not modelled.
Sales tax is a single combined rate applied once at purchase; registration renewals and annual property taxes on the vehicle are excluded.
The payment is level for the whole term, with no extra payments and no early payoff.
Depreciation, insurance, fuel, maintenance and repairs are excluded — this is the cost of buying the car, not of running it.
Add-on products sold in the finance office are not included unless you add them to the fees field.
A 0% promotional rate is taken at face value; any cash rebate forgone to get it is not counted.

Sources

Common questions

How is a car payment calculated?: From the amount financed, not the price. Take the vehicle price, add sales tax and dealer fees, then subtract the trade-in allowance and your cash deposit. The result is amortised over the term at the loan rate using the standard payment formula. On a $35,000 car with $5,000 traded in and $3,000 down at 7.2% over five years, that is $29,800 financed and $592.89 a month.
Does a trade-in reduce the sales tax I pay?: In most states, yes, tax is charged on the price less the trade-in allowance, so a $5,000 trade-in at a 7% rate saves $350 of tax on top of the $5,000 itself. A few states, including California and Virginia, tax the full purchase price regardless. Use the toggle to switch between the two and the calculator will show what the credit is worth.
Is a longer car loan a bad idea?: It lowers the payment and raises the total interest, which is the obvious trade. The less obvious problem is depreciation: a car loses value faster than a 72- or 84-month loan pays down principal, so you can spend years owing more than the car is worth. If you then need to sell or total the car, you owe the difference in cash.
Should I take the 0% financing or the cash rebate?: They are usually alternatives, not both. The honest comparison is the interest you would pay at the normal rate on the smaller, rebated price against zero interest on the full price. Run this calculator twice, once at 0% with the full price, once at the rate you would otherwise get with the price reduced by the rebate, and compare the total cost figures. The loan calculator does the same comparison without the tax and trade-in machinery if you prefer it plain.
What fees should I include?: Documentation, title and registration at minimum. If the dealer has quoted gap insurance, an extended warranty, or any protection package you intend to buy, add those too, they are financed at the same rate as the car and are frequently the most negotiable part of the deal.
Why is the dealer’s payment higher than this?: Usually add-ons in the finance office, a higher rate than you assumed, or a fee you did not know about. Ask for the amount financed and the APR in writing and put both into this calculator; if the payment still does not match, something is in the loan that you have not been told about. Once the loan exists, paying it down early is worth comparing against investing.

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