How an auto loan works
An auto loan pays for a vehicle that you repay in fixed monthly payments, usually over 36 to 84 months. The vehicle secures the loan, so the lender can take it back if you stop paying. This auto loan calculator adds what a dealer adds to the deal: sales tax, title and registration fees, cash incentives, a down payment and a trade-in, including money still owed on it. Enter the price to see the monthly payment, or switch to Monthly pay to find the price a payment you can afford will buy.
How the car payment is calculated
- Sales tax = (price − trade-in value − cash incentives) × tax rate. In states that tax the full price, the trade-in and incentives are not subtracted.
- Loan amount = price − cash incentives − down payment − trade-in value + amount owed on the trade-in, plus the sales tax and fees when you add them to the loan.
- Monthly payment M = P × r × (1 + r)n / ((1 + r)n − 1), where P is the loan amount, r the yearly rate / 12 and n the number of months.
- Total interest = M × n − P.
- Total cost = all loan payments + cash paid at signing + the trade-in value − the amount owed on it.
The Monthly pay tab runs the formula backwards: the loan a payment repays is P = M × (1 − (1 + r)−n) / r, and the vehicle price is that loan plus the down payment, incentives and trade-in, minus what you owe on the trade-in.
Example
A $50,000 car with $10,000 down and 7% sales tax: the tax is $3,500 and the fees are $2,300, both paid at signing, so you borrow $40,000. At 7.14% for 60 months the payment is $794.69 a month and the interest adds up to $7,681.56. You pay $15,800 at the dealership, and the car costs $63,481.56 in total.
Car payment by loan term
A $40,000 loan at 7.14%:
| Term | Monthly payment | Total interest |
|---|---|---|
| 36 months | $1,237.65 | $4,555.25 |
| 48 months | $960.45 | $6,101.60 |
| 60 months | $794.69 | $7,681.56 |
| 72 months | $684.65 | $9,294.98 |
| 84 months | $606.45 | $10,941.67 |
Stretching the loan from 60 to 84 months cuts the payment by about $188 but adds about $3,260 of interest. Lenders also tend to charge a higher rate on longer terms, and a car loses value fast, so a long loan can leave you owing more than the car is worth.
Car payment by interest rate
The rate depends mostly on your credit score and on whether the car is new or used. A $40,000 loan over 60 months:
| Rate | Monthly payment | Total interest |
|---|---|---|
| 0% | $666.67 | $0.00 |
| 3% | $718.75 | $3,124.86 |
| 5% | $754.85 | $5,290.96 |
| 7% | $792.05 | $7,522.88 |
| 9% | $830.33 | $9,820.05 |
| 12% | $889.78 | $13,386.67 |
| 15% | $951.60 | $17,095.83 |
| 20% | $1,059.76 | $23,585.32 |
A dealer often offers a choice between a cash rebate and a low promotional rate. The cash back or low interest calculator shows which one costs less.
How much car a payment buys
At 7.14% for 60 months with $10,000 down, sales tax and fees paid at signing:
| Monthly payment | Loan amount | Vehicle price |
|---|---|---|
| $400 | $20,134 | $30,134 |
| $500 | $25,167 | $35,167 |
| $600 | $30,200 | $40,200 |
| $750 | $37,750 | $47,750 |
| $1,000 | $50,334 | $60,334 |
A common guide is to keep the car payment under 10% to 15% of your take-home pay; the take-home paycheck calculator shows what that is for you. Lenders also look at all your debts together, which the debt-to-income ratio calculator measures.
Trade-in, sales tax and negative equity
Most states charge sales tax only on the price minus the trade-in value, so a trade-in also saves tax. Take the same $50,000 car with a $10,000 trade-in that still has $4,000 owed on it: the tax falls to $2,800, a saving of $700, and the loan becomes $50,000 − $10,000 − $10,000 + $4,000 = $34,000, or $675.49 a month.
- States that tax the full price: California, the District of Columbia, Hawaii, Kentucky, Maryland, Michigan, Montana and Virginia give no tax credit for the trade-in or incentives. Choose your state in the calculator to apply this.
- Local taxes can add to the state rate; enter the combined rate. The sales tax calculator works it out from a price.
- Negative equity: when you owe more on the trade-in than it is worth, the difference is added to the new loan, and you pay interest on it.
Taxes and fees: pay up front or finance them?
In the example, adding the $3,500 of tax and $2,300 of fees to the loan raises it to $45,800 and the payment to $909.92. You keep $5,800 in cash at signing but pay $1,113.83 more interest over 60 months.
Deducting car loan interest
For tax years 2025 through 2028, the One Big Beautiful Bill Act lets you deduct up to $10,000 a year of interest on a car loan, whether or not you itemize. In the example, the first year of interest is about $2,633, which the amortization schedule above shows year by year. The deduction applies when:
- the vehicle is new, had its final assembly in the United States and weighs under 14,000 pounds;
- it is for personal use, and the loan was taken out after December 31, 2024 and is secured by the vehicle;
- your modified adjusted gross income is under $100,000 ($200,000 for joint filers); above that the limit falls by $200 for every $1,000 of income.
Leases and used cars do not qualify. To compare a lease with buying, use the auto lease calculator; for a loan without taxes and a trade-in, the loan calculator is simpler.