Auto Loan Calculator
Calculate monthly car payment with tax, trade-in, and fees. Estimate affordable car budget with the 20/4/10 rule.
The Auto Loan Calculator estimates your monthly car payment, total interest, and overall cost of ownership including taxes, fees, and trade-in equity. Use it to compare financing options, test different down payment amounts, and ensure your next vehicle purchase fits comfortably within your budget.
Examples
New Car Purchase at 6.5% APR
You buy a $35,000 car with a $5,000 down payment, financing $30,000 at 6.5% APR for 60 months. Your monthly payment would be approximately $587, and you would pay $5,220 in total interest over the life of the loan.
Used Car Loan with Trade-In
You purchase a $20,000 used car, trading in your old vehicle for $4,000 and putting $1,000 cash down, financing $15,000 at 8.0% APR for 48 months. Your monthly payment would be about $366, with $2,568 in total interest paid.
Negative Equity Rollover Scenario
You buy a $28,000 vehicle but still owe $6,000 on your current car, which is worth only $3,000 as a trade-in. The $3,000 negative equity is added to your new loan. With a $2,000 down payment, taxes, and fees, you finance roughly $30,600 at 7% APR for 60 months, resulting in a $606 monthly payment and $5,740 in total interest.
New vs Used Car Financing
| Feature | New Car Financing | Used Car Financing |
|---|---|---|
| Typical APR | Lower (often 0-5% with promotions) | Higher (typically 5-10%+) |
| Loan Terms Available | Up to 84 months | Usually up to 60-72 months |
| Depreciation | Steepest in first 2-3 years (20-30%) | Slower; bulk of depreciation already occurred |
| Insurance Cost | Higher (often requires full coverage) | Lower (more flexibility on coverage) |
| Total Cost of Ownership | Higher purchase price but lower maintenance initially | Lower purchase price but potential for higher repairs |
| Best For | Buyers wanting warranty coverage, latest features, and predictable costs | Budget-conscious buyers comfortable with some maintenance risk |
Frequently Asked Questions
What is the 20/4/10 rule?
It suggests putting 20% down, financing for no more than 4 years, and keeping total vehicle costs (payment, insurance, fuel) under 10% of your gross monthly income. Following this rule helps prevent you from becoming financially overextended on a depreciating asset.
How do taxes work with trade-ins?
In many states, you only pay sales tax on the difference between the new car price and your trade-in value, saving you money. However, this calculator taxes the full price to provide a conservative estimate. Check your state rules for the exact treatment.
What is negative equity?
If you owe more on your trade-in than it is worth, the difference (negative equity) is added to your new loan. This increases your amount financed and monthly payment.
Is a longer loan term always better for my budget?
A longer term (e.g., 72 or 84 months) lowers the monthly payment but significantly increases total interest paid. It also raises the risk of being "underwater" -- owing more than the car is worth -- because the loan balance decreases slower than the vehicle depreciates.
Should I lease or buy?
Leasing typically offers lower monthly payments but you do not build equity and face mileage restrictions. Buying costs more per month but the vehicle is yours at the end of the loan. If you drive a lot or plan to keep the car for many years, buying usually makes more financial sense.
How does my credit score affect my auto loan rate?
Credit scores heavily influence the APR you are offered. Borrowers with excellent credit (750+) may qualify for rates under 5%, while those with poor credit (below 600) may see rates of 15% or higher. Even a small rate difference compounds into thousands of dollars over the loan term.
Key Terms
- MSRP (Manufacturer's Suggested Retail Price)
- The price the vehicle manufacturer recommends the dealer charge. It is a starting point for negotiation, not necessarily the final purchase price.
- Trade-In Value
- The amount a dealer credits you for your current vehicle when you purchase a new one. It reduces the amount you need to finance.
- Gap Insurance
- Insurance that covers the difference between what you owe on your auto loan and the car's actual cash value if it is totaled or stolen. Especially important when financing with a small down payment or a long loan term.
- 20/4/10 Rule
- A car-buying guideline recommending at least 20% down, a loan term of no more than 4 years, and total vehicle expenses (payment, insurance, gas) no more than 10% of gross monthly income.
- Negative Equity (Being Underwater)
- When you owe more on your auto loan than the vehicle is currently worth. This commonly occurs with low down payments, long loan terms, or rapid depreciation.
- Amount Financed
- The total dollar amount you actually borrow. It equals the vehicle price plus taxes and fees, minus your down payment and net trade-in value.
Sources
- Understanding Vehicle Financing — Consumer Financial Protection Bureau (CFPB)
- Auto Loans: What You Should Know — Federal Trade Commission (FTC)
- How Auto Loans Work — Investopedia
Result
498.7
- Monthly Payment
- 498.70076471057035
- Total Interest
- 3172.0458826342206
- Total Cost (Vehicle + Loan)
- 35922.04588263422
- Sales Tax
- 2250
Quick Tips
- •Follow the 20/4/10 rule: put at least 20% down, finance for no more than 4 years, and keep total vehicle expenses under 10% of gross monthly income.
- •Get pre-approved by your bank or credit union before visiting the dealership. Dealer financing is convenient but often carries a higher rate.
- •Negotiate the out-the-door price of the vehicle, not the monthly payment. Dealers can stretch the term to make any payment look affordable while increasing total cost.
- •Avoid rolling negative equity from an old car into a new loan. It increases the amount financed and can leave you underwater for years.
- •Consider a shorter loan term (36 or 48 months) to minimize interest and avoid owing more than the car is worth.