The full picture of a car payment
A dealer will often ask what monthly payment you want. A better question is what the car costs in total. This calculator builds the amount financed from the vehicle price, sales tax, fees, down payment and trade-in, then shows the monthly payment, the interest and the total cost.
How the amount financed is built
- Taxable price = vehicle price − trade-in value (most states tax only the difference).
- Add sales tax and title, registration and dealer fees.
- Subtract your down payment.
- Monthly payment = amount financed × r ÷ (1 − (1 + r)⁻ⁿ), with r = APR ÷ 12 and n the number of months.
Worked example: a $35,000 car
You put $5,000 down, have no trade-in, pay 6% sales tax and $800 of fees, and get a 7.5% APR for 60 months.
- Sales tax: 35,000 × 6% = $2,100.
- Amount financed: 35,000 + 2,100 + 800 − 5,000 = $32,900.
- Monthly payment: $659.25.
- Total interest: $6,655.
- Total cost of the car, including the down payment: $44,555.
Payment by loan term
| Term | Monthly payment | Total interest | Total cost |
|---|---|---|---|
| 36 months | $1,023.39 | $3,942 | $41,842 |
| 48 months | $795.49 | $5,283 | $43,183 |
| 60 months | $659.25 | $6,655 | $44,555 |
| 72 months | $568.84 | $8,057 | $45,957 |
| 84 months | $504.63 | $9,489 | $47,389 |
Stretching the loan to 84 months lowers the payment by about $155 compared with 60 months, but costs $2,834 more in interest. Long terms also raise the risk of owing more than the car is worth for years, since cars lose value fastest early on.
Getting a better deal
- Get pre-approved by a bank or credit union before visiting the dealer, so you can compare the dealer’s financing offer.
- Negotiate the price first, then the trade-in, then the financing, as separate conversations.
- Watch add-ons such as extended warranties, GAP insurance and paint protection that get rolled into the loan.
- Check promotional APRs: 0% or low-rate offers from manufacturers often require excellent credit and may replace a cash rebate.
A simple affordability rule
A common guideline is the 20/4/10 rule: put at least 20% down, finance for no more than 4 years, and keep total car costs (payment, insurance, fuel) under 10% of gross income. Use the car depreciation calculator to see how much value the car will lose while you pay it off.