How car loans really work (and how to pay less)
A vehicle purchase bundles several moving parts: the price of the car, taxes and fees required by your state, money you put down, any trade-in equity or negative equity, and the loan that covers the rest. This calculator separates those pieces so you can see a realistic monthly payment, the cash needed at signing, the amount financed, and the total interest over the life of the loan. The charts and amortization table make it easy to compare terms and spot trade-offs.
What each input means
- Auto price: The negotiated vehicle price before incentives.
- Cash incentives: Rebates or discounts that directly reduce the price.
- Down payment: Cash you pay at signing. Higher down reduces the amount financed.
- Trade-in value / amount owed: Your old car’s value minus any remaining loan. Positive equity reduces what you need to finance; negative equity increases it.
- Sales tax %: Many states tax the price after trade-in and incentives. This calculator follows that common approach and lets you override the rate.
- Title/registration/other fees: Mandatory fees that vary by state and dealer.
- Include taxes & fees in loan: If checked, those costs are rolled into the loan; otherwise they are paid at signing.
- Loan term & APR: Length of the loan (in months) and annual percentage rate. The payment formula compounds monthly.
How results are computed
- Taxable base = price − incentives − trade-in value (not below zero).
- Sales tax = taxable base × sales-tax rate.
- Amount financed = price − incentives − down − trade-in value + amount owed on trade-in + (taxes + fees if rolled into the loan).
- Upfront payment = down + (taxes + fees if not financed).
- Monthly payment uses the standard amortization formula with monthly compounding.
- Total cost = (price − incentives) + taxes + fees + total interest.
Ways to lower total cost
- Compare APRs from a credit union or bank before visiting the dealership.
- Shorten the term if the payment fits your budget; interest falls sharply with shorter loans.
- Put rebates toward the price instead of accessories; discounts that reduce principal save the most.
- If you have negative equity, consider selling the old car privately or paying down the difference before rolling it into a new loan.
Reading the charts & table
- The pie shows principal vs. interest over the life of the loan.
- The line chart tracks remaining balance, cumulative interest, and cumulative payments by year.
- The schedule lists each month’s interest, principal, and ending balance (expandable).
Estimates only. Actual taxes, fees, and lender terms vary by state and dealer. Always confirm with your DMV and lender before signing.