Car Finance Calculator
Calculate your car financing details including trade-in value, down payment, sales tax, and monthly payment breakdown. This calculator shows the true cost of financing a vehicle. For a simpler payment estimate, try our car payment calculator or compare with auto loan options.
How to Calculate Car Financing
- Start with the car's purchase price and subtract the trade-in value for the taxable amount.
- Calculate sales tax on the taxable amount (price minus trade-in in most states).
- Add sales tax to the car price, then subtract down payment and trade-in to get the amount financed.
- Use the amount financed, interest rate, and loan term to calculate the monthly payment.
- Add up all payments plus down payment and trade-in for the total cost of the car.
Formula
Sales Tax = (Car Price - Trade-In) x Tax Rate
Amount Financed = Car Price + Sales Tax - Down Payment - Trade-In
Monthly Payment = F x [r(1+r)^n] / [(1+r)^n - 1]
Where:
F = Amount financed
r = Monthly interest rate (annual rate / 12)
n = Loan term in months
Total Interest = (Monthly Payment x n) - Amount Financed
Total Cost = (Monthly Payment x n) + Down Payment + Trade-InExample
You buy a $40,000 car with $5,000 down, $8,000 trade-in, 6.5% tax, at 5.9% for 60 months:
Car Price = $40,000
Sales Tax = ($40,000 - $8,000) x 6.5% = $2,080
Amount Financed = $40,000 + $2,080 - $5,000 - $8,000 = $29,080
Monthly Rate = 5.9% / 12 = 0.4917%
Monthly Payment = $29,080 x [0.004917(1.004917)^60] / [(1.004917)^60 - 1]
= $29,080 x 0.01932 / 0.34175
= $561.87 / 0.34175
= $561.87
Total Interest = ($561.87 x 60) - $29,080 = $4,632
Total Cost = ($561.87 x 60) + $5,000 + $8,000 = $46,712Car Finance Reference Table
| Amount Financed | 36 mo @ 5% | 48 mo @ 5.5% | 60 mo @ 6% | 72 mo @ 6.5% |
|---|---|---|---|---|
| $15,000 | $450 | $349 | $290 | $252 |
| $20,000 | $599 | $465 | $387 | $336 |
| $25,000 | $749 | $581 | $483 | $420 |
| $30,000 | $899 | $698 | $580 | $504 |
| $35,000 | $1049 | $814 | $677 | $588 |
| $40,000 | $1199 | $930 | $773 | $672 |
Frequently Asked Questions
How does trade-in value reduce my financing?
Your trade-in value is subtracted from the purchase price before calculating the amount financed. It also reduces the taxable amount in most states, saving you sales tax. A higher trade-in means a smaller loan and lower monthly payments.
Should I finance through the dealer or my bank?
Compare both options. Dealers sometimes offer promotional rates (0% or low APR) on new cars. Banks and credit unions often have competitive rates for used cars. Get pre-approved by your bank first, then see if the dealer can beat it.
What is the ideal loan-to-value ratio for a car?
Aim to finance no more than 80% of the car's value. This means a combined down payment and trade-in of at least 20%. This prevents being "underwater" (owing more than the car is worth) as the vehicle depreciates.
How does my credit score affect car financing?
Credit scores significantly impact your interest rate. Excellent credit (750+) may qualify for 3-5%, good credit (700-749) for 5-7%, fair credit (650-699) for 7-10%, and poor credit may face 10-20% or higher rates.
Is it better to put more money down or keep a shorter term?
Both reduce total interest. A larger down payment reduces the principal immediately. A shorter term means less time for interest to accumulate. Ideally, do both: put 20% down and choose the shortest term you can afford.