Auto Loan Calculator

A car loan calculator turns the price of a vehicle into one important number: how much you have to pay each month, including interest, taxes and various fees, so that in the end you know what the car really costs.

By plugging in the price, down payment, interest rate and length of time, you can figure out your monthly payments and total cost. It's also possible to work backwards: You can calculate how much you can comfortably afford based on your monthly budget or determine the down payment required to achieve a certain monthly payment.

The three possible uses of this calculator:

Select a mode from the top. The monthly payment mode is the most common one to use. When you enter in the vehicle price and loan terms, your monthly payment will be shown at the top along with the loan amount, sales tax, cash due at signing, total interest, and total cost. In the loan amount mode, it works the problem backwards. If you enter in your monthly budget, it will show what is the highest priced car that you can afford with that budget. The required down payment mode tells you how much cash up front you need to have based on the price and desired monthly payment.

All three modes can be customized by adding a used vehicle, enabling taxes and fees options, or setting additional monthly payments.

What is included in the loan amount?

The loan amount almost never matches the vehicle price. You start with the price, subtract any down payment and the value of any trade-in vehicle, add any remaining debt on the trade-in vehicle, and then subtract any cash rebates. If sales tax and fees are not paid up front at contract time but rolled into the loan, they will be added in as well. The remaining amount is the principal balance that monthly payments will be based upon.

Assuming the price is $50,000, the down payment is $10,000, there are no trade-ins and taxes and fees are paid up front at closing. The loan amount would be $40,000. Sales tax would be $3,500 if it's 7 percent of the price. Add in $2,000 for fees and you have $15,500 in cash due at closing, which is the down payment plus taxes and fees that are not included in the loan.

Calculation of monthly repayment amounts

Auto loans are usually repaid on an amortization basis with equal monthly payments. The monthly payment amount is constant, but each payment contains both interest and a portion of the principal. At the beginning of the loan term, the interest component is higher, while later in the term the principal component increases. An amortization formula is used to calculate the fixed monthly payments.

L is the loan amount, r is the monthly interest rate (annual interest rate divided by 12), and n is the number of months. If the loan amount is $40,000, the annual interest rate is 5 percent, and the term is 60 months, then the monthly interest rate is .05/12, and the number of payments is 60.

This means that you will pay approximately $754.85 each month for a total of $45,291 over 60 months, with interest amounting to $5,291. When taxes and fees are added on, the car's total cost is about 60,791. The table shows the individual input parameters with example values.

VAT, replacement vehicle and applicable sequence

In most states sales tax is charged on the price after subtracting the value of the trade-in vehicle. So a trade-in reduces both the credit and the tax. This calculator follows that rule, and considers the amount subject to tax as being the price less the value of the trade-in. Cash rebates are treated differently. In many states sales tax is still charged on the full amount before the rebate, so the rebate reduces the credit but not the tax. There are a few exceptions where it may be different, so you should check your state's rules.

Fees charged by car dealerships

In addition to taxes, dealers charge various flat fees. The document processing fee covers the cost of handling contract documents. The title and registration fee is required to register the vehicle with the state and put it in your name. New vehicles also have a transportation fee that covers the cost of getting the car from the manufacturer to the dealer. These fees are totaled up and listed on the line item for them. You can then decide whether you want to pay these fees when you sign the contract or roll them into your financing. If you roll the fees into your financing, you will need less cash at the time of purchase but end up paying more interest over the life of the loan.

Dealer financing or a bank?

You can either get financing through the dealer or apply for a loan with a bank, credit union, or online lender before visiting a dealership. Dealer financing is convenient and may offer lower interest rates in some cases. However, getting pre-approval from an outside institution will give you an idea of what interest rates are available and more negotiating power. Enter both your dealer's offers and your own research into this calculator to compare monthly payments and total interest paid.

How much equity should you put in?

A higher down payment reduces the loan amount, lowers monthly payments and reduces interest paid over the life of the loan. It also helps avoid a situation where your loan is more than the value of the car. This is especially important for new cars that depreciate quickly in their first few years. In general, it's recommended to put at least 10-20% of the price of a new car as a down payment. The required down payment mode will help you calculate exactly how much equity you need to reach a certain monthly payment goal.

Pay off a loan early.

Most auto loans do not have prepayment penalties so any extra amount you pay will go directly to reducing the principal. This reduces the remaining balance on which interest is calculated, allowing you to pay off your loan faster and save money on interest. Enable the option for additional payments and increase your monthly payment slightly to see how it affects your projected payoff date and interest savings.