How it works
The amount financed is the price, plus sales tax and fees if you roll them into the loan, minus your down payment and your trade-in equity. If you owe more on the trade-in than it is worth, the difference (negative equity) is added to the loan. The monthly payment uses the standard amortization formula with the APR divided by 12. A year-by-year schedule shows how much of what you pay goes to interest.
Payment = P × r ÷ (1 − (1 + r)^−n) · r = APR ÷ 12 · n = months
P = price + tax + fees − down − (trade-in − owed)
Tips
- Compare offers by APR and total cost, not just the monthly payment. A longer term lowers the payment but raises total interest.
- Get pre-approved by a bank or credit union before visiting the dealer, so you can compare it with dealer financing.
- Most states tax only the price after the trade-in credit, but a few tax the full price; untick the box if yours does. Check your state revenue department for your exact rate, including local taxes.
- Avoid rolling negative equity from your old car into the new loan; you start out owing more than the car is worth.
Standards and sources
- Auto loans · Consumer Financial Protection Bureau (CFPB)
- Loan interest rate vs. APR · CFPB
- G.19 Consumer Credit (auto loan rates) · Federal Reserve
Last reviewed October 15, 2026
Frequently asked questions
How is a car payment calculated?
Monthly payment = P × r ÷ (1 − (1 + r)^−n), where P is the amount financed, r is the APR ÷ 12 and n is the number of months. $30,000 at 7% for 60 months is about $594 a month.
Is sales tax charged before or after the trade-in?
In most states sales tax is charged on the price minus the trade-in value, which saves you tax. A few states tax the full price. Use the checkbox to match your state.
Should I choose a 72- or 84-month loan?
They lower the payment but cost much more interest, and you can owe more than the car is worth for years. The CFPB suggests comparing total cost, not just the monthly payment.
What APR should I enter?
The APR from your pre-approval or the dealer offer. APR includes the interest rate plus certain finance charges, so it is the right number for comparing loans.