Car Loan Calculator

Calculate Car Loan Payment

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$
$
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Amount Financed

$25,000

Monthly Payment

$495.03

Total Interest

$4,702

See how this is calculated

How This Calculation Works

This calculator first finds the amount you actually need to finance by subtracting your down payment and any trade-in value from the vehicle's price. It then applies the standard loan amortization formula to that amount to find a fixed monthly payment that fully pays off the loan over your chosen term.

A larger down payment or trade-in reduces the amount financed, which reduces both your monthly payment and the total interest paid over the life of the loan — since interest is calculated on the outstanding balance, a smaller starting balance means less interest accrues overall.

This calculator doesn't include sales tax, registration fees, or dealer add-ons, which vary significantly by location and can add a meaningful amount to your total out-the-door cost. Check your local requirements and any dealer quote carefully for these additional costs.

Common Mistakes to Avoid

  • Not shopping your interest rate. Dealer-arranged financing isn't always the best rate available. Getting pre-approved by a bank or credit union before visiting the dealership gives you a benchmark and negotiating leverage.
  • Overestimating your trade-in value. Dealers often offer less for a trade-in than independent valuation tools suggest. Get an independent estimate before negotiating so you know your trade-in's real market value.
  • Focusing only on the monthly payment. A longer loan term lowers the monthly payment but increases total interest paid and increases the risk of being "underwater" (owing more than the car is worth) for longer, since cars depreciate quickly.
  • Forgetting taxes and fees in the budget. Sales tax, title, registration, and documentation fees can add several percent to the total cost — factor these into your total budget, not just the financed amount.

Worked Example

Scenario: A $28,000 vehicle, with a $3,000 down payment and no trade-in, financed at 7% over 5 years (60 months).

Step 1 — Amount financed: $28,000 − $3,000 = $25,000.

Step 2 — Monthly rate: 7% ÷ 12 ≈ 0.583%.

Step 3 — Monthly payment: Using the amortization formula with these values ≈ $495.03.

Step 4 — Total interest: ($495.03 × 60) − $25,000 ≈ $4,701.80 over the life of the loan.

Frequently Asked Questions

How much should I put down on a car?
A common guideline is 10-20% of the vehicle's price, which helps avoid being underwater on the loan (owing more than the car is worth) in the early months, since new cars depreciate quickly. A larger down payment also reduces your monthly payment and total interest.
Is it better to get a longer loan term for a lower payment?
A longer term lowers your monthly payment but increases total interest paid and extends the period where you might owe more than the car is worth. Many financial advisors recommend keeping auto loan terms at 60 months or less when possible, and matching the loan term to how long you plan to keep the vehicle.
Should I get pre-approved before visiting a dealership?
Yes — getting pre-approved by a bank or credit union gives you a real interest rate benchmark and negotiating power at the dealership, since you can compare their financing offer against a rate you already have in hand, or simply use your pre-approval directly.
Does my trade-in value reduce sales tax in addition to the loan amount?
In many (but not all) regions, trade-in value reduces the taxable amount of your new purchase, providing a tax benefit beyond just lowering the amount financed. Rules vary significantly by location — check your local or state tax regulations for specifics.

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