Auto Loan Calculator

A car loan differs from a personal loan in one important way: the thing you are borrowing against loses value faster than you repay the debt. A new car typically drops 20% or more in its first year, while a 72-month loan has barely touched the principal by then. The result is negative equity — owing more than the car is worth — which is the single most common financial trap in vehicle buying. This calculator works from the real numbers rather than the sticker price: vehicle price less trade-in and down payment, plus sales tax and fees rolled into the loan, at the rate and term you are being offered. It returns the monthly payment, the amount actually financed, and the total interest, so you can see what the deal costs rather than only what it costs per month.

How this is calculated

The financed amount is the vehicle price, plus sales tax and fees, minus your trade-in value and down payment. That figure goes through the standard amortisation formula — M = P × r × (1+r)ⁿ / ((1+r)ⁿ − 1) — with r the annual rate divided by twelve and n the term in months. Total interest is the sum of payments minus the amount financed.

Because tax and fees are financed here rather than paid upfront, they accrue interest for the whole term. On a $2,500 tax bill at 7% over 60 months, that adds roughly $470 of interest to the deal — money paid for the privilege of not writing a cheque at signing.

Why the monthly payment is the wrong number to negotiate

Dealers negotiate in monthly payments because it is the number buyers care about, and it is the easiest one to manipulate. Extending a term from 60 to 84 months can drop the payment by $100 while adding thousands in interest, and it does so without changing the price of the car at all.

Negotiate the vehicle price, the trade-in value and the financing rate as three separate conversations, then use this calculator to see what monthly payment falls out. If the payment is wrong, the fix is a bigger down payment or a cheaper car — not a longer term.

Negative equity and how long it lasts

With a small down payment and a long term, most buyers spend the first two to three years underwater. Selling or writing off the car during that window means paying the difference out of pocket, and rolling that shortfall into the next car loan is how people end up financing two vehicles at once.

A 20% down payment and a term of 60 months or less usually keeps you close to break-even throughout. Gap insurance covers the difference if the car is written off while underwater, and is worth considering on any long-term loan with little money down.

How to use the auto loan calculator

Enter the vehicle price. Use the negotiated out-the-door price, not the sticker. Add dealer fees separately if they are not included.
Subtract trade-in and down payment. Both reduce the amount financed directly, and therefore reduce interest across the whole term.
Enter sales tax, rate and term. Compare 48, 60 and 72 months. The monthly payment falls each time; watch what the total-interest row does.

Frequently asked questions

Should I finance the sales tax?

If tax is rolled into the loan (as here), you pay interest on it too. Paying tax and fees upfront keeps the financed amount — and total interest — lower.

Is a longer car loan better?

72–84 month loans lower the monthly payment but cost far more interest, and you risk owing more than the car is worth. 36–60 months is the usual sweet spot.

What is negative equity on a car loan?

Owing more than the car is currently worth. It happens because cars depreciate faster than long loans amortise — typically 20% or more in year one against a loan that has repaid far less. It matters if you need to sell or the car is written off, since you owe the shortfall in cash.

Should I take dealer financing or arrange my own?

Get a quote from your own bank or credit union first, then let the dealer try to beat it. Dealer financing is sometimes genuinely cheaper thanks to manufacturer subsidy, but having an outside offer in hand is the only way to know. Never disclose your target monthly payment before the price is settled.