Your real monthly payment, trade-in and tax included.

How does the trade-in value affect the loan?

Your trade-in reduces the amount you need to finance, just like a down payment. In most US states, it also reduces the taxable amount — sales tax applies to (price − trade-in), not the full price, which is why the trade-in appears twice in the math: once reducing the loan amount directly, and once reducing the tax added on top.

Why is sales tax financed into the loan?

Most buyers roll sales tax into the loan rather than paying it upfront in cash, so this calculator adds it to the financed amount by default. If you're paying tax separately in cash, set the sales tax rate to 0 here and account for it outside the calculator.

What loan terms are typical for cars?

36, 48, 60, and 72 months are the most common terms in the US, with 72 and even 84 months increasingly common as vehicle prices rise. Longer terms lower the monthly payment but increase total interest paid substantially and raise the risk of owing more than the car is worth ("upside down") for longer, since cars depreciate faster than a long loan pays down principal.

Worked example: a $32,000 car with a $4,000 down payment, no trade-in, and 7% sales tax has a taxable amount of $32,000, adding $2,240 in tax — financing $30,240 at 6.5% over 60 months costs roughly $592/month and about $5,261 in total interest.

What a longer term actually costs

Stretching the term lowers the monthly payment and raises the total price of the car. On $35,000 at 7%:

Going from 48 to 84 months cuts the payment by $310 a month and adds $4,142 of interest. Dealers quote monthly payments precisely because that framing makes the 84-month option look like the affordable one.

Negative equity is the real risk of a long term

Cars depreciate fastest in the first two or three years, while a long loan pays down principal slowest in exactly that window. The two curves cross, and for a stretch in the middle of an 84-month loan you can owe more than the car is worth.

That matters the moment anything forces a sale — a job move, a write-off, a change in circumstances. You'd have to find the shortfall in cash to close the loan. A larger deposit or a shorter term is the only reliable protection.

Read the APR, not the rate

APR includes lender fees; the nominal rate doesn't. Two loans quoting the same rate can carry different APRs, and the APR is the one that reflects what you'll actually pay.

Also treat dealer finance as a separate negotiation from the price of the car. A discount that's funded by a worse finance package isn't a discount. Get a pre-approval from a bank or credit union first — it costs nothing and turns the conversation into a straightforward price negotiation.

The payment isn't the cost of running the car

Insurance, fuel, tax, servicing and tyres are often comparable to the loan payment itself. Budget on total running cost, not the finance instalment — the Fuel Cost Calculator covers the largest of the variable pieces.