Purchasing a vehicle is one of the most significant financial decisions many people make. While the sticker price of a car is the starting point, the actual cost of ownership involves complex factors including sales tax, interest rates (APR), trade-in equity, and down payments. Our Auto Loan Calculator helps you break down these costs to see exactly what you will pay monthly and over the life of the loan.
How Trade-Ins and Down Payments Affect Your Loan
One of the most effective ways to lower your monthly car payment is to reduce the principal amount of the loan. This is done through two primary methods:
Trade-In Value: If you are selling your old car to the dealership, the agreed-upon value is subtracted from the new car's price. In many jurisdictions, you also receive a tax credit, meaning you only pay sales tax on the difference between the new car price and your trade-in value.
Down Payment: Paying cash upfront reduces the risk for the lender and the amount you need to borrow. A larger down payment can sometimes qualify you for a lower interest rate.
Pro Tip: Financial experts often recommend the "20/4/10" rule: put 20% down, finance for no more than 4 years, and keep total transportation costs under 10% of your monthly gross income.
The Impact of Loan Terms and Interest Rates
The loan term is the length of time you have to repay the loan. While opting for a longer term (e.g., 72 or 84 months) will lower your monthly payment, it significantly increases the total interest you pay. Conversely, a shorter term increases your monthly obligation but saves you money in the long run.
Your APR (Annual Percentage Rate) is largely determined by your credit score. A difference of just 1% or 2% in interest can add up to thousands of dollars over the life of a car loan. Always check your credit score before visiting a dealership to ensure you are getting a competitive rate.
Calculation Methodology
This calculator uses the standard amortization formula to determine payments. It first calculates the taxable amount (Vehicle Price) and adds the Sales Tax. It then subtracts your Trade-In Value and Down Payment to find the "Amount Financed." The monthly payment is derived using your specific APR and loan term.
function calculateCarLoan() {
// 1. Get Input Values
var price = parseFloat(document.getElementById("ac_price").value);
var taxRate = parseFloat(document.getElementById("ac_tax").value);
var tradeIn = parseFloat(document.getElementById("ac_trade").value);
var downPayment = parseFloat(document.getElementById("ac_down").value);
var interestRate = parseFloat(document.getElementById("ac_rate").value);
var termMonths = parseFloat(document.getElementById("ac_term").value);
// 2. Validate Inputs
if (isNaN(price) || isNaN(taxRate) || isNaN(tradeIn) || isNaN(downPayment) || isNaN(interestRate) || isNaN(termMonths)) {
alert("Please enter valid numbers in all fields.");
return;
}
// 3. Logic: Calculate Tax and Loan Principal
// Note: Tax laws vary. This calculator assumes tax is applied to the full vehicle price
// before trade-in (common in some states) or after (common in others).
// For simplicity and general use, we will apply tax to the Price, then subtract trade/down.
// A more complex version might toggle tax-credit logic.
// Let's assume Tax is calculated on (Price – TradeIn) in many states (Tax Credit).
// If TradeIn > Price, tax base is 0.
var taxableAmount = Math.max(0, price – tradeIn);
var taxAmount = taxableAmount * (taxRate / 100);
// Total Cost to Purchase (Cash Price)
var totalCost = price + taxAmount;
// Loan Principal (Amount to Finance)
var loanPrincipal = totalCost – tradeIn – downPayment;
// Handle case where trade/down covers the whole cost
if (loanPrincipal <= 0) {
document.getElementById("res_monthly").innerText = "$0.00";
document.getElementById("res_principal").innerText = "$0.00";
document.getElementById("res_interest").innerText = "$0.00";
document.getElementById("res_total").innerText = "$" + totalCost.toFixed(2);
document.getElementById("ac_results").style.display = "block";
return;
}
// 4. Logic: Amortization Calculation
var monthlyRate = (interestRate / 100) / 12;
var monthlyPayment = 0;
var totalInterest = 0;
var totalRepayment = 0;
if (interestRate === 0) {
// Simple division if 0% APR
monthlyPayment = loanPrincipal / termMonths;
totalRepayment = loanPrincipal;
totalInterest = 0;
} else {
// Standard Formula: M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1 ]
var x = Math.pow(1 + monthlyRate, termMonths);
monthlyPayment = loanPrincipal * ((monthlyRate * x) / (x – 1));
totalRepayment = monthlyPayment * termMonths;
totalInterest = totalRepayment – loanPrincipal;
}
// 5. Update HTML Results
document.getElementById("res_monthly").innerText = "$" + monthlyPayment.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById("res_principal").innerText = "$" + loanPrincipal.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById("res_interest").innerText = "$" + totalInterest.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById("res_total").innerText = "$" + totalRepayment.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
// Show results container
document.getElementById("ac_results").style.display = "block";
}