How your car payment is calculated
First, work out how much you are borrowing. In most states sales tax is charged on the price after your trade-in is subtracted. Fees are usually rolled into the loan.
The monthly payment then uses the standard loan formula, P × r ÷ (1 − (1 + r)−n), where r is the APR divided by 12 and n is the number of months.
The 20/4/10 guideline
A popular rule of thumb: put at least 20% down, finance for no more than 4 years, and keep total car costs under 10% of your gross income. It is not a law, but it keeps you from owing more than the car is worth.
Frequently asked questions
Is sales tax included in a car loan?
It can be. Many buyers roll tax and fees into the loan, which is what this calculator assumes. Paying them upfront lowers the loan amount and the interest.
Does a trade-in reduce sales tax?
In most U.S. states, yes: tax is charged on the price minus the trade-in. A few states tax the full price, so check your state’s rules.
Should I choose 72 or 84 months?
Longer terms lower the payment but add interest and raise the chance of owing more than the car is worth. Switch the term above to compare the total cost.