Auto Loan Calculator
Calculate a car loan payment including trade-in equity, a manufacturer incentive, sales tax and fees — with the true amount financed shown.
How to use this calculator
- 1Enter the vehicle price, your down payment, and any manufacturer incentive.
- 2Add your trade-in value and what you still owe on it — if you owe more than it is worth, that gets rolled into the new loan automatically.
- 3Enter your local sales tax rate and any title or registration fees, and choose whether to finance them or pay them at signing.
How the calculation works
Amount financed = Price − Incentives − Down payment − (Trade-in value − Amount owed) + Tax + Fees- Trade-in value − Amount owed
- Net trade-in equity — negative if you owe more than the car is worth, which increases the amount financed
- Tax
- Sales tax on the price after the trade-in credit and incentive
The monthly payment itself is the standard loan annuity formula, applied to the full amount financed above.
Worked example
$35,000 car, $3,000 down, $8,000 trade-in owing $5,000, 7% tax
- 1.Net trade-in equity: $8,000 − $5,000 = $3,000.
- 2.Taxable amount: $35,000 − $1,000 incentive − $8,000 trade-in = $26,000. Tax at 7% = $1,820.
- 3.Amount financed: $35,000 − $1,000 − $3,000 − $3,000 + $1,820 + $500 = $30,320.
- 4.Monthly payment on $30,320 at 6.5% over 60 months: $593.25.
Result: $593.25/month, $30,320 financed
What makes an auto loan different from other borrowing
An auto loan is a secured loan: the vehicle itself is the collateral, and the lender holds a lien on the title until the balance is paid off. That is why a lender can repossess the car if payments stop, and it is also why auto loan rates are usually lower than an unsecured personal loan for a borrower with the same credit profile — the lender has something tangible to recover.
The twist is that the collateral loses value from the moment it is driven off the lot. A vehicle depreciates every year regardless of how well the loan is being repaid, which is what creates the risk of owing more than the car is worth — a situation that shapes several of the numbers this calculator produces.
The moving parts of a car deal
A vehicle purchase bundles several figures together that a plain loan calculator would not need to separate.
- Auto price — the negotiated purchase price before any credits are applied.
- Down payment — cash paid up front, which reduces the amount financed directly.
- Trade-in value — what the dealer credits for a vehicle you are giving up, offset by anything still owed on it.
- Cash incentives — manufacturer or dealer rebates applied to the price, often before sales tax is calculated.
- Sales tax and fees — title, registration and documentation charges, which most states calculate on the price after trade-in and incentive credits — though the exact rule varies by state.
Trade-ins and negative equity
A trade-in is only worth what the dealer credits for it minus whatever loan balance is still attached to it. When the amount owed exceeds the trade-in value, the shortfall is called negative equity, and on most deals it does not go away — it gets folded into the new loan, so the new financing starts out larger than the price of the new vehicle alone would suggest.
Rolling negative equity forward is one of the most common ways buyers end up owing more than a vehicle is worth again a few years later, since a depreciating asset is now securing an even larger loan. Where possible, paying down negative equity in cash before trading in avoids compounding the problem into the next purchase.
Getting a better deal on the financing
The financing and the vehicle price are two separate negotiations, and treating them that way tends to produce a better outcome.
- 1Arrange financing before you shop — a pre-approved rate from a bank or credit union gives you a benchmark to compare the dealer’s offer against, rather than negotiating price and financing in the same conversation.
- 2Put down more cash where you can — a larger down payment lowers the amount financed and can help avoid being underwater on the loan if the car depreciates faster than the balance falls.
- 3Choose the shortest term you can afford — longer terms lower the monthly payment but stretch out the period during which the loan balance can exceed the car’s value.
- 4Weigh a manufacturer rebate against a low-rate offer — these are usually mutually exclusive — taking the 0% financing typically means giving up the cash rebate, and which is cheaper depends on the loan amount and term.
What this assumes, and where it stops
Assumptions
- Sales tax is calculated on the price after subtracting the trade-in value and cash incentive — the most common rule, though several states tax the price before one or both credits.
- The trade-in and new purchase happen in the same transaction with the same dealer.
Limitations
- Sales tax rules genuinely vary by state — some do not give a trade-in tax credit at all, and county or city tax can add more on top of the state rate entered here.
- Does not model dealer financing promotions like 0% APR offers that typically require giving up a cash rebate — compare with the Cash Back vs Low Interest Calculator for that trade-off.
Common questions
What if I owe more on my trade-in than it is worth?
That's negative equity, and it does not disappear — it gets added to the new loan, so you are financing your old car's remaining debt on top of the new one. It is one of the most common ways buyers end up owing more than a car is worth from day one, so it is worth knowing the number before you're at the dealership.
Should I pay the sales tax and fees in cash or finance them?
Financing them keeps more cash in your pocket today but means paying interest on tax and fees for the life of the loan — a cost that adds up on a 5 or 6-year term. If you can afford it, paying them upfront is cheaper overall.
Does the trade-in value actually reduce my sales tax?
In most states, yes — trading a vehicle in at the same dealership reduces the taxable amount by the trade-in value, which is a real saving over selling the car privately and buying separately. A handful of states do not offer this credit, so check your state's specific rule before relying on the figure here.
Sources
- Understanding auto loans — US Consumer Financial Protection Bureau
Formula and content last reviewed on .
Results are estimates for information only, not professional advice.
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