Formula
Amount financed = price + sales tax + fees − down payment − (trade-in − amount owed)Payment = L · r ÷ (1 − (1 + r)^−n), r = APR ÷ 12 How it works
A car payment depends on how much you finance, not just on the sticker price. Sales tax, title and registration fees and dealer documentation fees are usually added to the loan, while your cash down payment and any trade-in equity are subtracted.
Most U.S. states charge sales tax only on the difference between the new car's price and your trade-in, which makes trading in at the dealer worth more than its face value. A few states — including California, Michigan and Virginia — tax the full price; choose "Full price" if that applies to you.
If you owe more on your current car than it is worth, the shortfall (negative equity) is typically rolled into the new loan. That raises the payment and means you start the new loan underwater, so it is worth paying down or waiting if you can.
Longer terms like 72 or 84 months lower the payment but raise total interest and keep you owing more than the car is worth for longer. Compare the total cost line, not just the monthly figure.
Frequently asked questions
How much should I put down on a car?
Around 20% on a new car (10% on used) is a common target. It keeps the loan below the car's value as it depreciates and lowers both the payment and total interest.
Is the dealer's rate the same as APR?
Usually the quoted auto rate is the APR. If the lender adds separate loan fees, the true APR is higher; use the APR calculator to check.
What credit score do I need for the best rate?
Lenders typically reserve their lowest rates for scores above about 720. Getting pre-approved by a bank or credit union before visiting the dealer gives you a rate to compare against.