What is Auto Loan Calculator?
An auto loan calculator determines monthly vehicle installment payments and total borrowing charges factoring in trade-in allowances, cash down payments, sales tax, and dealer financing terms.
How to Use This Calculator
- Enter sticker price of vehicle.
- Deduct cash down payment and trade-in allowance.
- Specify sales tax percentage and APR interest rate.
- Select loan term length to compare monthly payments against total financing charges.
The Mathematical Formula & Variables
Monthly Payment = [Financed Amount * r * (1 + r)^n] / [(1 + r)^n - 1]
Variables Definition
| Symbol / Variable | Name | Description |
|---|---|---|
P |
Financed Sum | (Vehicle Price - Down Payment - Trade-in) + Sales Tax. |
Step-by-Step Worked Example
Scenario: $32,000 car, $5,000 down, $2,000 trade-in, 7% sales tax ($2,100), financed at 6.5% APR for 60 months.
- Total loan principal = $32,000 - $5,000 - $2,000 + $2,100 = $27,100.
- Monthly interest rate = 0.065 / 12 = 0.005417.
- Monthly payment for 60 months = $530.22.
- Total interest paid over 5 years = $4,713.
Result: Monthly Payment: $530.22 | Total Interest: $4,713
Frequently Asked Questions
Why are 72-month and 84-month car loans risky?
Longer terms lower monthly payments but cause you to pay thousands more in total interest. Cars depreciate quickly, increasing the risk of negative equity (being "upside-down" or owing more than the vehicle is worth).