Calculator Use
This vehicle payment calculator helps you estimate the monthly cost of financing a new or used car. By entering the purchase price, interest rate, and term length, you can determine if a specific vehicle fits within your monthly budget. This tool accounts for essential variables like sales tax, trade-ins, and down payments to give you a comprehensive view of your financial commitment.
Whether you are shopping at a dealership or buying from a private seller, knowing your monthly payment in advance allows you to negotiate with confidence.
- Vehicle Price
- The total purchase price of the car before taxes and fees.
- Down Payment
- The amount of cash you provide upfront to reduce the loan balance.
- Trade-in Value
- the value of your current vehicle that the dealer credits toward your new purchase.
- Interest Rate (APR)
- The annual percentage rate charged by the lender for the loan.
- Loan Term
- The length of the loan in months (standard terms are 36, 48, 60, or 72 months).
How It Works
The vehicle payment calculator uses the standard amortization formula to calculate monthly payments. It first determines the total loan principal by adding sales tax to the vehicle price and then subtracting any trade-ins and down payments. The formula for the monthly payment is:
PMT = P * [ r(1 + r)^n ] / [ (1 + r)^n - 1 ]
- PMT: Monthly Payment
- P: Loan Principal (Price + Tax - Down Payment - Trade-in)
- r: Monthly Interest Rate (Annual Rate / 12)
- n: Number of Months (Loan Term)
Calculation Example
Example: You are buying a car for $25,000. You have a $3,000 down payment and a trade-in worth $2,000. Your state sales tax is 5%. You secured a 60-month loan at 4.0% APR.
Step-by-step solution:
- Determine Taxable Amount: $25,000 - $2,000 (Trade) = $23,000
- Calculate Sales Tax: $23,000 * 0.05 = $1,150
- Calculate Loan Principal: ($25,000 + $1,150) - $3,000 - $2,000 = $21,150
- Calculate Monthly Rate: 0.04 / 12 = 0.003333
- Apply Formula: $21,150 * [0.003333(1.003333)^60] / [(1.003333)^60 - 1]
- Result = $389.51 per month
Common Questions
Does the calculator include title and registration fees?
This specific vehicle payment calculator focuses on the purchase price and sales tax. While title and registration fees vary by state, you can add those estimated costs to the "Vehicle Price" field if you intend to roll them into the loan.
How does my credit score affect the payment?
Your credit score primarily determines the Interest Rate (APR). Higher credit scores typically qualify for lower rates, which reduces both your monthly payment and the total interest paid over the life of the loan.
Is it better to have a longer or shorter loan term?
A longer term (e.g., 72 months) results in a lower monthly payment but increases the total interest you pay. A shorter term (e.g., 36 months) has higher monthly payments but saves you money in interest and helps you build equity in the vehicle faster.