How to Calculate a Car Loan Payment

The monthly payment is driven by the amount financed, not the advertised price. Start with the vehicle price, add sales tax and dealer or state fees, then subtract your down payment and any trade-in value. A 30,000 dollar car with 2,100 dollars of tax and 400 dollars in fees, minus a 5,000 dollar trade-in and 2,000 dollars down, is financed at 25,500 dollars.

Trade-in matters twice. In many states you only pay sales tax on the price after the trade-in is deducted, so a trade can shrink both the loan and the tax on it. Rules vary by state, so treat the tax line as an estimate.

A fixed-rate car loan uses the standard amortization formula: M = P times r times (1+r)^n divided by ((1+r)^n minus 1). Here P is the amount financed, r is the monthly rate (APR divided by 12), and n is the number of monthly payments.

For example, 25,500 dollars at a 7 percent APR over 60 months gives r = 0.0058333 and n = 60. The result is a payment of roughly 505 dollars. Over the full term you pay about 30,300 dollars, meaning close to 4,800 dollars in interest on top of the amount financed.

Stretching a loan from 48 to 72 months lowers the monthly payment but raises total interest, because you owe the balance for longer. A longer term also increases the window where you owe more than the car is worth, since vehicles depreciate fastest early on.

A useful habit is to compare the total cost of the loan, not just the monthly figure. Two offers with the same payment can differ by thousands once you multiply the payment by the number of months.

The calculator handles the tax, trade-in, and amortization math so you can compare offers quickly.

A payment calculator covers principal and interest, but ownership costs more. Insurance, registration renewals, maintenance, and fuel are not part of the loan and vary widely by driver and region. Gap coverage or an extended warranty rolled into financing will also raise the amount financed and the interest you pay.

Treat the output as a lender-independent estimate. Your actual APR depends on credit, the lender, and current rates, so confirm the final figures on the loan agreement before signing.