$48,799
Average new car transaction price (2025)
7.1%
Average new car loan rate (2025)
72 mo
Most common loan term
~10%
Recommended minimum down payment
How the monthly payment is calculated
Auto loan payments use the same amortizing-loan formula as mortgages. The lender takes your loan amount (vehicle price minus down payment, plus any financed taxes and fees), your monthly interest rate (APR ÷ 12), and the number of months, then calculates a fixed payment that retires the debt with interest by the final month. Because car loan terms are shorter than mortgages, interest front-loading is less severe but still significant.
How sales tax affects your loan
Most states calculate sales tax on the full vehicle price before any manufacturer rebates or discounts. If you finance the tax (roll it into the loan rather than paying upfront), you also pay interest on it for the entire loan term. On a $45,000 car in a 9% sales tax state, that's $4,050 of tax — financed at 7% over 72 months, it adds about $600 in pure interest cost on top of the tax itself.
How to use the auto loan calculator
- Enter the vehicle price and your down payment amount
- Select your state — the calculator applies that state's average sales tax rate
- Enter the interest rate from your lender or dealer
- Choose the loan term: shorter terms mean higher payments but less total interest
- Review the monthly payment, total interest paid, and total cost of the vehicle
- Adjust the down payment or term to find a payment that fits your budget
Key factors that affect your payment
- Loan term — extending from 48 to 72 months cuts the monthly payment but can add $2,000–$5,000 in total interest
- Credit score — borrowers with 750+ scores qualify for near-prime rates; scores below 620 can see rates above 15%
- New vs. used — used car loan rates are typically 1–2% higher than new car rates
- Down payment — a larger down payment reduces both the loan amount and the risk of being underwater
- Trade-in value — applied to the purchase price, it reduces what you finance
⚠️ Watch out for long terms
A 84-month (7-year) auto loan can make an expensive car seem affordable monthly, but cars depreciate fast. After 2 years on a long loan, many borrowers owe more than the car is worth — a situation called being 'underwater' that creates problems if you need to sell or the car is totalled.
Common mistakes to avoid
- Focusing only on monthly payment, not total cost — dealers exploit this by stretching terms
- Rolling negative equity from a trade-in into the new loan, compounding debt
- Accepting the dealer's financing without getting a pre-approval from your bank or credit union first
- Forgetting to factor in insurance, registration, and maintenance costs beyond the payment
- Not reading the APR — the rate on the window sticker is the purchase price, not the financing cost
Related calculators
Use the APR Calculator to verify the true annualized cost of a dealer financing offer that includes fees. The Debt-to-Income Ratio Calculator helps you check whether adding a car payment keeps your total debt load within lender guidelines. And the Credit Card Payoff Calculator can help you prioritize whether to pay down existing debt before taking on a car loan.