How to Estimate a Car Loan Payment
November 9, 2026
A dealer will happily quote you a monthly payment. Working it out yourself first tells you whether that payment is a good deal, and stops a low monthly figure from hiding an expensive loan.
You need five numbers: the price, your down payment, any trade-in value, the sales tax rate and the APR. Put them into the auto loan calculator, or follow the steps below.
Step 1: Work out how much you'll borrow
The amount financed is the price plus sales tax, minus your down payment and trade-in.
Take a $32,000 car, a $4,000 down payment, a $6,000 trade-in and 6% sales tax. Most states charge tax on the price after the trade-in, so the tax is 6% of $26,000, which is $1,560. Some states, including California, tax the full price instead.
Amount financed: $32,000 + $1,560 − $4,000 − $6,000 = $23,560.
Dealer fees, such as documentation and registration, can add to this. Ask for an out-the-door price so nothing gets added at the end.
Step 2: Apply the loan formula
Car loans are amortized. Every payment is the same, and early payments are mostly interest. The monthly payment is:
Payment = P × r ÷ (1 − (1 + r)^−n)
Here P is the amount financed, r is the APR divided by 12 and written as a decimal, and n is the number of months.
At 7% APR for 60 months, r = 0.07 ÷ 12 = 0.0058333 and n = 60. The payment comes to $466.52 a month. Over five years you repay $27,990.97, of which $4,430.97 is interest. Counting the down payment and trade-in, the car costs you $37,990.97 in all.
Step 3: Compare loan terms
A longer loan lowers the monthly payment, but you pay interest for longer. Here's the same $23,560 at 7% APR:
| Term | Monthly payment | Total interest |
|---|---|---|
| 36 months | $727.46 | $2,628.72 |
| 48 months | $564.17 | $3,520.33 |
| 60 months | $466.52 | $4,430.97 |
| 72 months | $401.67 | $5,360.57 |
| 84 months | $355.58 | $6,309.02 |
Going from 48 to 84 months cuts the payment by $208.59 but adds $2,788.69 of interest. A long loan also makes it more likely that you'll owe more than the car is worth for the first few years, because cars lose value fastest when they're new.
Step 4: See what the APR does
Your rate depends mostly on your credit score, the loan term and whether the car is new or used. On the same 60-month loan:
| APR | Monthly payment | Total interest |
|---|---|---|
| 5% | $444.61 | $3,116.38 |
| 7% | $466.52 | $4,430.97 |
| 9% | $489.07 | $5,784.01 |
| 12% | $524.08 | $7,884.75 |
Going from 5% to 9% adds $44.46 a month and $2,667.63 of interest. Getting preapproved by a bank or credit union before you shop gives you a rate to hold up against the dealer's offer.
Rules of thumb for affordability
- The 20/4/10 rule. A popular guideline is to put at least 20% down, borrow for no more than 4 years, and keep total car costs, including insurance and fuel, under 10% of your gross income.
- Debt-to-income ratio. Lenders compare your monthly debt payments with your gross monthly income. Check yours with the debt-to-income calculator.
- APR, not just the rate. The APR includes certain fees on top of the interest rate, so it's the better way to compare what two loans really cost.
Check the numbers yourself
The auto loan calculator does all of this at once, including tax, trade-in, total interest and the full cost of the car. For a loan without a trade-in or sales tax, such as a personal loan, use the loan calculator. To see how much tax is in a price, try the sales tax calculator.
These figures are estimates for planning. Your lender's contract sets the actual payment.