What affects your car payment
Your payment depends on how much you finance, the interest rate and the term. The amount financed is the car's price minus your down payment, cash incentives and trade-in value, plus anything you still owe on the trade-in. If you roll sales tax and fees into the loan, those are financed too, and you pay interest on them.
How sales tax and trade-ins work
In most US states, sales tax is charged on the price minus your trade-in, so a trade-in saves you tax as well. A few states, including California, tax the full price before the trade-in. Title, registration and dealer fees vary by state and dealer; ask for an out-the-door price to see them all.
Choosing a loan term
Longer loans lower the monthly payment but cost more interest, and you may owe more than the car is worth for longer. This calculator compares your term with one 12 months shorter or longer, so you can see the trade-off before you sign.
Example
A $50,000 car with $10,000 down, financed for 60 months at 5%, costs $754.85 a month. With 7.25% sales tax ($3,625) and $2,800 in fees paid upfront, you'd need $16,425 at signing. Total interest comes to about $5,291.
Frequently asked questions
Should I roll taxes and fees into my car loan?
It lowers what you pay at signing, but you'll pay interest on those costs and start the loan owing more than the car is worth. Paying them upfront is cheaper if you can.
What's a good auto loan term?
Many advisers suggest 60 months or less for a new car and 48 months or less for a used one. Longer terms are common but cost more and increase the risk of owing more than the car's value.
How do I know what price I can afford?
Switch to “Monthly budget,” enter the payment you're comfortable with, and the calculator works backward to the highest price that fits, after your down payment, trade-in, tax and fees.