Car Loan Calculator: Monthly Payments and Interest
An car loan calculator estimates the monthly payment for a vehicle purchase using the amount borrowed, annual interest rate, and repayment term. The amount financed can include sales tax, fees, and an outstanding trade-in loan, minus your down payment and trade-in value.
Calculating the amount financed
Amount financed = vehicle price + sales tax + financed fees − down payment − trade-in value + trade-in loan payoff.
A down payment reduces borrowing. Fees paid separately at purchase should not be included as financed fees. The CFPB explains how a down payment affects an car loan.
Auto loan monthly payment formula
M = P × r ÷ [1 − (1 + r)−n], where P is the amount financed, r is the annual interest rate divided by 1,200, and n is the number of monthly payments. When the interest rate is zero, M = P ÷ n.
Each payment covers interest on the remaining balance and a portion of principal. Under this fixed-rate monthly model, the interest portion decreases as the balance falls. Total interest is the sum of the monthly interest amounts.
Worked car loan example
A vehicle price of $30,000 and a $5,000 down payment leave $25,000 to finance when taxes, fees, and trade-in amounts are zero. At 6.5% annual interest over 60 months, the estimated monthly payment is $489.15. Total loan payments are approximately $29,349.22, including $4,349.22 in interest.
The down payment plus loan payments total approximately $34,349.22. That figure excludes running costs and any fees paid separately.
How loan length changes the cost
For the same principal and positive interest rate, a longer loan term lowers the monthly payment while increasing total interest. Comparing only the monthly payment can hide the cost of extending repayment. Compare the amount financed, rate, term, and total payments together, as described in the CFPB guide to comparing car loan offers.
Trade-in equity, negative equity, and sales tax
Trade-in equity equals the vehicle’s trade-in value minus its outstanding loan balance. A $10,000 trade-in with a $7,000 payoff contributes $3,000 toward the purchase. A $10,000 trade-in with a $12,000 payoff adds $2,000 to borrowing if the shortfall is financed.
This estimate applies the entered tax percentage to the full vehicle price and finances the resulting tax. Tax treatment can vary by location, including whether a trade-in reduces the taxable price. For a different tax arrangement, set sales tax to zero and enter the actual financed tax with the fees.
Frequently asked questions
Should I enter APR or the interest rate?
Use the annual interest rate for this amortization formula. APR can include required fees as well as interest, so it may differ from the rate used to calculate payments. The CFPB explains APR and loan disclosures.
Can the loan have a zero interest rate?
Yes. Divide the amount financed by the number of monthly payments. A $24,000 loan over 60 months at 0% has a $400 monthly payment.
What if the purchase is fully covered?
If the amount financed is exactly zero, the payment and interest are zero. If the down payment and trade-in equity exceed the purchase total, adjust the entered amounts.
Does the estimate include insurance or maintenance?
No. Insurance, fuel, maintenance, and other running costs are separate from repayment of the vehicle loan.
Why might a lender quote a different payment?
Daily interest accrual, the first payment date, fees, payment rounding, and contract terms can change the actual schedule. This calculator assumes equal monthly periods, fixed interest, and no additional payments or charges.