';summary+='Total Sales Tax: $'+salesTax.toLocaleString(undefined,{minimumFractionDigits:2,maximumFractionDigits:2})+'
';summary+='Total Interest Paid: $'+totalInterest.toLocaleString(undefined,{minimumFractionDigits:2,maximumFractionDigits:2})+'
';summary+='Total Cost of Vehicle: $'+totalCost.toLocaleString(undefined,{minimumFractionDigits:2,maximumFractionDigits:2});if(document.getElementById('steps').checked){summary+='
Step 1: Calculate Principal. Principal = (Price – Down – Trade + Owed + Tax + Fees)
';summary+='Step 2: Apply Amortization Formula using Monthly Interest Rate and Term.';}document.getElementById('summaryArea').innerHTML=summary;document.getElementById('answer').style.display='block';}
How to Use the Vehicle Payment Calculator
Whether you are buying a brand-new truck or a pre-owned sedan, understanding your monthly budget is the most critical part of the car-buying process. Our vehicle payment calculator helps you break down the total cost of ownership by including often-overlooked factors like sales tax, documentation fees, and trade-in equity.
To get an accurate estimate, simply enter the following details into the fields above:
- Vehicle Price
- The negotiated purchase price of the car before any taxes or fees.
- Down Payment
- The amount of cash you are paying upfront to reduce the loan balance.
- Trade-in Value & Amount Owed
- If you are trading in your old vehicle, enter its value. If you still owe money on that vehicle (negative equity), enter that amount in the "Owed on Trade" field.
- Interest Rate (APR)
- The annual percentage rate provided by your lender or bank.
- Loan Term
- The duration of the loan in months (commonly 36, 48, 60, or 72 months).
The Vehicle Loan Formula
Automobile loans are typically structured as amortizing loans. This means you pay a fixed amount every month, a portion of which goes to the principal and a portion to the interest. The vehicle payment calculator uses the following mathematical expression:
PMT = P * [ i(1 + i)^n ] / [ (1 + i)^n – 1 ]
Where:
- PMT = Monthly Payment
- P = Principal Loan Amount (Price – Down Payment – Trade Equity + Tax/Fees)
- i = Monthly Interest Rate (Annual Rate / 12 months)
- n = Total number of monthly payments (Loan Term)
Example Calculation
Scenario: You are buying a car for $30,000. You have a $5,000 down payment and a trade-in worth $10,000. You still owe $2,000 on that trade-in. Your interest rate is 6% for a 60-month term. Sales tax is 5% and fees are $500.
Step-by-Step Solution:
- Taxable Amount: $30,000 (Price) – $10,000 (Trade) = $20,000.
- Sales Tax: $20,000 * 0.05 = $1,000.
- Principal (P): $30,000 – $5,000 – $10,000 + $2,000 + $1,000 + $500 = $18,500.
- Monthly Rate (i): 0.06 / 12 = 0.005.
- Term (n): 60 months.
- Calculation: PMT = 18,500 * [0.005(1.005)^60] / [(1.005)^60 – 1]
- Monthly Payment: $357.65
Important Considerations
How does credit score affect my payment?
Your credit score is the primary factor in determining your APR. A higher credit score typically allows you to qualify for lower interest rates, which can save you thousands of dollars over the life of the loan. Even a 1% difference in APR can significantly change your result in the vehicle payment calculator.
Should I choose a longer loan term?
Longer terms (72 or 84 months) lower your monthly payment but increase the total interest you pay. Additionally, vehicles depreciate quickly; with a very long term, you risk being "underwater," where you owe more than the car is worth.
What is the 20/4/10 rule?
Financial experts often suggest the 20/4/10 rule: Put down at least 20%, finance for no more than 4 years (48 months), and keep your total vehicle expenses (payment, insurance, fuel) under 10% of your gross monthly income.