About Auto Loans
A car deal has four levers — price, rate, term, and trade — and dealerships are practiced at moving the conversation to “what monthly payment fits your budget?” because a payment can be made to look small by stretching the term. Running the math yourself before the finance office is the single best negotiating tool you can bring.
Enter the negotiated price, your down payment and trade-in, your state's vehicle sales tax, and the APR you've been quoted or pre-qualified for. You get the payment, the financed amount with its build-up, total interest over the loan, and the all-in cash cost of the car — the number the payment conversation is designed to hide.
Comparing against a personal loan or refinance? The general-purpose math is in the Loan Calculator.
The Payment Math
Standard amortization on the true financed amount:
Financed = price + sales tax − down payment − trade-in (tax on price − trade-in in most states) Payment = Financed × r ÷ (1 − (1 + r)⁻ⁿ), r = APR ÷ 1200
Worked example: a $30,000 car with $3,000 down, no trade, 6% tax, 7% APR for 60 months → financing $28,800, paying $570.27 a month and $5,416 of interest — $37,216 total cash over five years. Add a $5,000 trade-in and stretch to 72 months and the payment drops to $400.65, but see the term warning below.
Payment per $10,000 Borrowed
60-month payments per $10,000 financed — scale to any loan size (all computed by this calculator's formula):
| APR | Payment per $10k (60 mo) | Interest per $10k |
|---|---|---|
| 5% | $188.71 | $1,323 |
| 6% | $193.33 | $1,600 |
| 7% | $198.01 | $1,881 |
| 8% | $202.76 | $2,166 |
| 9% | $207.58 | $2,455 |
| 10% | $212.47 | $2,748 |
Quick use: financing $28,800 at 7%? 2.88 × $198.01 ≈ $570 a month. Each APR point costs roughly $280–290 more interest per $10k over five years — which is what a better credit score is worth in car terms.
Rules That Keep a Car Affordable
The budgeting conventions worth knowing before the dealership visit:
- The 20/4/10 rule of thumb: ~20% down, no more than a 4-year term, all car costs (payment + insurance + fuel) under 10% of gross income.
- Long terms (72–84 months) buy a lower payment with slower equity: you owe more than the car is worth for years — negative equity that rolls painfully into the next purchase.
- Get pre-qualified with a bank or credit union before the dealership; the dealer's finance office then has a real number to beat rather than a captive audience.
- Negotiate the PRICE, not the payment — every payment target can be hit by quietly stretching the term or padding add-ons.
- Gap insurance matters exactly when down payment is small and term is long — the situations this calculator will show as slow-equity loans.
The CFPB's auto-loan guide (cited below) covers the negotiation sequence and the add-ons worth refusing.