Car payments and trade-in equity
Initial loan balance includes the purchase price, modeled sales tax, financed fees, and any old loan payoff, minus cash down and trade-in value. The scheduled payment is rounded to cents; the final payment absorbs rounding differences. Down payment plus loan payments measures cash paid through this model and excludes the value of a vehicle surrendered in trade.
To compare the cost of two rate-and-term offers, use the Loan Comparison Calculator with the initial loan balance shown here.
The formula
L is the new loan balance, r is the annual contract interest rate divided by 1,200, and n is the number of monthly payments. At zero interest, M = L/n. Sales tax is rate × taxable price, rounded to cents. Taxable price is either the full vehicle price or max(0, price − trade-in value), according to your selection. The schedule rounds monthly interest to cents and applies the rest of each payment to principal.
A $20,000 loan at 6% over five years
A vehicle priced at $25,000 with $5,000 cash down and no tax, fees, or trade-in produces a $20,000 loan. At 6% annual interest over 60 months, the scheduled payment is $386.66. The first interest charge is $100.00, the first principal payment is $286.66, and the balance after that payment is $19,713.34.
How to use this calculator
- Enter the agreed vehicle price and cash down payment without subtracting the trade-in twice.
- Enter the contract interest rate and a whole-number term from 1 to 120 months; select the currency.
- Open Advanced options to enter the applicable tax rate, the taxable-price rule, financed fees, trade-in value, and outstanding trade-in loan.
- Calculate, review the initial balance and trade-in equity, then expand the monthly payment schedule.
Why the financed amount differs from the sticker price
A payment quote depends on the amount borrowed, not just the advertised vehicle price. Taxes and fees added to the loan increase that amount; a cash down payment reduces it. Use the agreed purchase price and enter each charge once. Fees paid separately at purchase do not belong in the financed-fees field.
Positive and negative trade-in equity
Trade-in equity is the vehicle allowance minus the loan payoff still owed on it. A $5,000 trade-in with a $2,000 payoff contributes $3,000 toward the purchase. If the payoff is $7,000 instead, equity is negative $2,000 and this model adds that shortfall to the new loan. Confirm the actual payoff amount and how the lender handles the old balance.
Sales tax and financing terms
Tax treatment of trade-ins varies by location. The calculator offers two explicit taxable-price assumptions instead of assigning a state or country rule. The trade-in loan payoff affects financing equity, not the selected trade-in tax credit. Some transactions also have rebates, taxable add-ons, exemptions, or fee rules that require a separate estimate.
Use the contract interest rate for the payment schedule. APR can reflect finance charges in addition to interest, so substituting APR while also financing those fees can distort the estimate. Comparing lender APR disclosures remains useful, but this calculator does not calculate a regulatory APR.
Read the schedule before choosing a longer term
A longer term can lower the monthly payment while increasing interest paid. The schedule exposes how each payment is divided between interest and principal. This is a monthly-interest model; a daily simple-interest contract can produce different charges when payment dates vary. Insurance, repairs, fuel, and depreciation also affect affordability but are outside the financing calculation.
Assumptions & limitations
What this calculation assumes
- The interest rate stays fixed and payments arrive at the end of each monthly period.
- Taxes and financed fees are added once; the final payment clears the balance after cent rounding.
- A negative trade-in equity balance is fully rolled into the new loan.
What to keep in mind
- No local tax lookup, rebate rules, promotional balloon payments, variable rates, or regulatory APR calculation.
- Daily interest accrual and payment timing can differ from the monthly estimate.
- The cash-outlay result excludes insurance, operating expenses, upfront fees outside the loan, and the economic value of the trade-in.
Common questions
Can I use this for a used car?
Yes. Enter the agreed used-vehicle price and the applicable interest, tax, and fee inputs. The formulas do not depend on whether the car is new or used.
What if I owe more than my trade-in is worth?
Enter both amounts. Negative equity increases the modeled new loan balance, assuming the lender permits the shortfall to be financed.
Why is the last payment different?
The regular payment and each monthly interest charge are rounded to cents. The last payment is adjusted to clear the remaining balance instead of leaving a small unpaid amount.
Does the calculator find my sales tax rate?
No. You supply the rate and choose the taxable-price assumption. Verify local treatment of trade-ins, fees, rebates, and exemptions before relying on a tax estimate.