How to use this calculator
The results update as you type.
- Car price: the price you’ve agreed with the seller, before tax and fees.
- Down payment: cash you’ll pay up front.
- Trade-in value and amount owed: what the dealer will give you for your current car, and what you still owe on it. The difference is your trade-in equity. If you owe more than it’s worth, the shortfall is added to the loan.
- Sales tax rate: your state rate plus any local rate.
- Fees: dealer documentation, title and registration fees you’ll add to the loan.
- Interest rate (APR) and loan term: from your loan offer or preapproval.
- Sales tax after trade-in: tick this if your state taxes the price after subtracting the trade-in value.
The results show your monthly payment, the amount financed, sales tax, total interest, the total cost of the car and your payoff date. Below the calculator, a table shows how the amount financed is built up, and the chart and schedule show each year’s principal and interest.
Example: a $22,000 used car
Say you’re buying a $22,000 used car. You’re putting $2,000 down and trading in a car worth $4,000 that still has $1,500 owing. Sales tax is 6%, charged after the trade-in, fees are $600, and you’re offered 9.5% APR over 60 months.
| Amount | |
|---|---|
| Car price | $22,000.00 |
| Down payment | − $2,000.00 |
| Trade-in equity ($4,000 − $1,500) | − $2,500.00 |
| Sales tax (6% of $18,000) | + $1,080.00 |
| Fees | + $600.00 |
| Amount financed | $19,180.00 |
Your payment would be $402.82 a month, with $4,988.94 in interest. The car’s total cost, including tax, fees and interest, is $28,668.94.
Now compare the rate with the term:
| Change | Monthly payment | Total interest |
|---|---|---|
| 48 months instead of 60 | $481.86 | $3,949.36 |
| 72 months instead of 60 | $350.51 | $6,056.62 |
| 6.5% APR instead of 9.5% | $375.28 | $3,336.72 |
| 12.5% APR instead of 9.5% | $431.51 | $6,710.63 |
The gap between a 6.5% and a 12.5% rate is $3,373.91 in interest, three times the extra cost of stretching the loan to 72 months. Shopping for a better rate before you visit the dealer can matter more than any other choice.
How it’s calculated
- Trade-in equity = trade-in value − amount owed.
- Sales tax = tax rate × price, or tax rate × (price − trade-in value) if your state taxes the price after the trade-in.
- Amount financed = price − down payment − trade-in equity + sales tax + fees.
- Monthly payment = loan × r ÷ (1 − (1 + r)^−n), where r is the monthly rate (APR ÷ 12 ÷ 100) and n is the number of months. At 0% APR, it’s the loan ÷ n.
Each month, interest is the balance × r, and the rest of the payment reduces the balance. The last payment is adjusted so the balance ends at exactly zero. The total cost of the car is the price plus sales tax, fees and interest. Figures are calculated at full precision and rounded for display, so your lender’s figures may differ by a few cents.
Tips for financing a used car
- Get preapproved before you shop. A rate from your bank or credit union gives you a number for the dealer to beat.
- Negotiate the price, not the payment. Agree the out-the-door price first. A dealer can reach almost any payment by stretching the term.
- Put down what you comfortably can. Each $1,000 down saves about $260 in interest in our example, and lowers the risk of owing more than the car is worth.
- Watch out for negative equity. Rolling an old loan into a new one means paying interest on a car you no longer own.
- Keep the term short. Used cars lose value as they age, so a long loan can leave you owing more than the car is worth.
- Read the Buyers Guide and get an inspection. Check whether the car comes with a warranty or is sold as is.
Frequently asked questions
How is a used car loan payment calculated?
First, work out the amount financed. That's the price minus your down payment and trade-in equity, plus sales tax and any fees you roll in. Then the standard loan formula spreads that amount and the interest over the term. The calculator does both steps as you type.
How much does a bigger down payment save?
Every dollar you put down is a dollar you don't borrow or pay interest on. In our example at 9.5% APR over 60 months, each extra $1,000 down saves about $260 in interest and lowers the payment by about $21 a month.
Does a trade-in lower the sales tax?
In some states, sales tax is charged on the price after subtracting your trade-in value, which can save hundreds of dollars. In others, it's charged on the full price. Tick or untick the trade-in tax box to match your state, and check with your state's tax or motor vehicle agency if you're unsure.
What is negative equity on a trade-in?
It's when you owe more on your current car than it's worth. The difference is usually added to your new loan, so you pay interest on it. In our example, owing $7,000 on a $4,000 trade-in raises the payment from $402.82 to $518.33 a month.
Is a 72-month used car loan a good idea?
A longer term lowers the payment but costs more interest, and you may owe more than the car is worth for longer. In our example, 72 months instead of 60 cuts the payment by $52.31 but adds $1,067.68 in interest.
What should I check before buying a used car from a dealer?
Read the Buyers Guide. The FTC's Used Car Rule requires dealers to display one on each used car they offer for sale, showing whether the car comes with a warranty and what it covers. Ask for a vehicle history report and an independent inspection too.