How to calculate a car loan
Enter the vehicle price, any down payment, and the trade-in value of your current car. The amount financed (principal) is vehicle price minus down payment minus trade-in. Then enter the annual interest rate and loan term in years. The monthly payment is calculated using the standard amortization formula: M = P[r(1+r)^n] / [(1+r)^n − 1], where P is the principal, r is the monthly rate (annual rate ÷ 12), and n is the total number of months.
Car loan examples
A $25,000 car with a $5,000 down payment financed at 6% for 5 years costs about $386/month. A $40,000 car with a $8,000 down payment at 5% for 6 years costs about $484/month. Shorter terms mean higher monthly payments but significantly less total interest paid.
Frequently Asked Questions
What is a trade-in value?
A trade-in value is the amount a dealership credits you for your existing vehicle when you buy a new one. It directly reduces the loan principal, lowering your monthly payments and total interest. You can estimate your car's trade-in value using sites like Kelley Blue Book or CarGurus.
Does this include taxes and fees?
No — this calculator covers principal and interest only. Sales tax, registration fees, and dealer fees vary by location and should be added to the vehicle price if you want a more accurate total cost.