How to use the monthly car payment calculator
- Enter the negotiated vehicle price and your down payment.
- If trading in a vehicle, enter its value and any loan balance still owed on it.
- Enter your sales tax rate and fees, and choose whether your trade-in reduces the taxable price and whether tax and fees are financed.
- Enter the APR from your lender and choose the loan term.
How the calculation works
The calculator first finds the amount financed: price plus tax and fees (if financed), minus your down payment and your trade-in equity (value minus amount owed). If you owe more than the trade-in is worth, that negative equity increases the loan.
It then applies the standard amortizing loan formula with a monthly rate equal to APR ÷ 12. Each month, interest is charged on the remaining balance and the rest of the payment reduces principal. Interest is rounded to the cent each month, and the final payment is adjusted so the balance ends at exactly zero.
Formula
- r
- Monthly interest rate = APR ÷ 12 (6.5% APR → 0.0054167)
- n
- Number of monthly payments
- tax
- Tax rate × (price − trade-in, if your state credits trade-ins)
Worked examples
$32,000 car, $4,000 down, 7% tax, $800 fees, 6.5% APR for 60 months
Tax = 7% × 32,000 = $2,240. Financed = 32,000 + 2,240 + 800 − 4,000 = $31,040.
r = 0.065 ÷ 12 = 0.00541667. Payment = 31,040 × 0.00541667 ÷ (1 − 1.00541667−60) = $607.33. Total interest over 5 years ≈ $5,400.
Trade-in with negative equity
A trade-in worth $10,000 with $12,500 owed adds $2,500 to the loan. On a 60-month loan at 6.5%, that adds about $49 per month.
Assumptions and limitations
- Sales tax rules vary by state and locality (some tax fees, rebates or the full price regardless of trade-in). Check your local rules.
- Assumes a fixed rate, monthly payments starting one month after purchase, and no prepayment penalties, add-ons, GAP insurance or extended warranties unless entered as fees.
- Lenders may compute interest by day count or round differently, so actual payments can differ by a few cents.
- This is an illustration, not a credit offer. Your rate depends on your credit, the lender and the vehicle.
Frequently asked questions
How is a car payment calculated?
With the standard amortization formula: payment = P × r ÷ (1 − (1 + r)−n), where P is the amount financed, r is the monthly rate (APR ÷ 12) and n is the number of months.
Is a longer loan term better?
A longer term lowers the monthly payment but increases total interest, and you may owe more than the car is worth for longer. Compare total interest across terms before deciding.
Does a trade-in lower sales tax?
In many US states, sales tax is charged on the price minus the trade-in value, but not in all. Untick the option if your state taxes the full price.
What happens with 0% APR financing?
You pay no interest: the payment is the amount financed divided by the number of months. Compare it with any cash rebate you would give up to get 0% financing.