How is a car payment calculated?
A car payment is worked out in two stages: first the amount financed, then the payment on it.
- Sales tax. Multiply the taxable price by your sales tax rate. With the defaults, the $35,000 price less the $8,000 trade-in leaves $27,000 taxable, and 7% of that is $1,890.
- Amount financed. Price + sales tax + fees rolled in - down payment - trade-in + anything still owed on the trade-in: $35,000 + $1,890 + $900 - $3,000 - $8,000 = $26,790.
- Payment. Use PMT = L x i / (1 - (1 + i)^-n) with i = APR / 12. At 7.5% over 60 months, i = 0.625%, and the payment is $536.82 a month.
The 60 payments total $32,209.00, so the interest is $5,419.00. Counting the down payment and the trade-in, the car costs $43,209 in all. The panel beside the result shows each line of the build-up for your own figures, and the first year of payments includes $1,853.66 of interest, leaving a balance of $22,201.86.
Does a trade-in reduce sales tax on a car?
Whether the trade-in value comes off the price before sales tax is charged depends on the state. The calculator does not hold any state's rules. It asks you instead, with the toggle under the tax rate.
The difference is the trade-in value times the tax rate. On the default deal, $8,000 x 7% = $560 of tax. With the toggle on, tax is $1,890; with it off, tax is charged on the full $35,000, which comes to $2,450, the amount financed rises to $27,350 and the payment to $548.04, $11.22 more a month. Your state's revenue department, or the dealer's buyer's order, shows which treatment applies to you. Enter the combined state and local rate you will pay; the field accepts three decimal places for rates such as 6.625%.
What if I owe more on my trade-in than it is worth?
That gap is called negative equity, and a dealer can add it to the new loan. Enter the payoff on your current loan under the extra options and the calculator adds it to the amount financed, less the trade-in value.
Suppose you still owe $10,000 on a car worth $8,000. The $2,000 shortfall is not what gets added: the trade-in value is subtracted and the full $10,000 payoff is added, so the amount financed becomes $36,790 instead of $26,790. At 7.5% over 60 months the payment rises from $536.82 to $737.20, and interest from $5,419.00 to $7,441.77. You are then paying interest on the old car as well as the new one, and the new loan starts larger than the car it buys.
What does rolling the fees into a car loan cost?
Documentation, title and registration fees can be paid at signing or added to the loan. On the default deal, $900 of fees paid at signing leaves $25,890 to finance and a payment of $518.78. Adding them to the loan makes it $26,790 and the payment $536.82: $18.03 more a month, and $182.05 of extra interest over five years.
Paying the fees up front means more cash at signing, $3,900 instead of $3,000. The calculator does not tax the fees; if yours are taxed, add the tax to the fee figure. Use the fee amounts on your own buyer's order.
How do the loan term and the APR change a car payment?
A longer term spreads the same $26,790 over more months, lowering each payment but raising the interest:
| Term | Monthly payment | Total interest at 7.5% APR |
|---|---|---|
| 36 months | $833.34 | $3,210.08 |
| 48 months | $647.75 | $4,302.13 |
| 60 months | $536.82 | $5,419.00 |
| 72 months | $463.20 | $6,560.55 |
| 84 months | $410.91 | $7,726.64 |
Going from 36 to 84 months cuts the payment by $422.42 a month and adds $4,516.56 of interest. The rate matters as much: over 60 months, the same loan costs $499.45 a month at 4.5% APR, $536.82 at 7.5% and $575.82 at 10.5%, with interest of $3,176.79, $5,419.00 and $7,759.30. The chart beside the result compares terms on your own figures.
Worked examples in euros and dirhams
The arithmetic works in any currency. Where a quoted price already includes tax, enter a tax rate of 0%. These examples leave out tax and fees to show the loan alone.
| Car | Down payment | Financed | Rate and term | Monthly payment | Total interest |
|---|---|---|---|---|---|
| €30,000 | €6,000 | €24,000 | 5.9%, 60 months | €462.87 | €3,772.33 |
| AED 90,000 | AED 18,000 | AED 72,000 | 4.5%, 48 months | AED 1,641.85 | AED 6,808.85 |
The trade-in and sales-tax steps above follow US practice. Elsewhere, the rules on tax, on what a dealer may add to a loan and on how a rate is quoted differ; the UK, for example, states an APR as an effective annual rate, and UK PCP and hire purchase are covered by the car finance calculator.
How do you calculate a car payment in Excel?
Work out the amount financed in one cell, then use PMT. Microsoft documents the function as PMT(rate, nper, pv, [fv], [type]) and notes that the result includes principal and interest but no taxes, reserve payments or fees, which is why the tax and fees go into the loan amount first.
- Amount financed: =35000 + (35000-8000)*7% + 900 - 3000 - 8000, which gives 26,790.
- Payment: =PMT(7.5%/12, 60, -26790), which returns 536.82.
- Total interest: =536.82*60 - 26790, about 5,419.
To test a state that taxes the full price, change (35000-8000) to 35000 in the first formula.
Common mistakes and what this calculator leaves out
- Shopping by monthly payment. An 84-month loan has the lowest payment and the highest interest.
- Forgetting the tax. 7% on $27,000 is $1,890 that has to be paid or financed.
- Counting negative equity once. A payoff above the trade-in value adds to the new loan and then earns interest.
- Comparing different APR conventions. A US APR on a car loan without prepaid fees is the yearly rate the payment is worked on; a UK APR is compounded.
The calculator assumes a fixed APR, equal monthly payments starting a month after purchase, and that the amount financed is exactly the sum shown. It leaves out manufacturer rebates and incentives, add-on products such as service contracts or gap coverage, taxes on fees, leases, balloon payments, any credit check, and every state's own rules on tax and trade-ins. For a loan on something other than a car, or weekly payments, see the loan calculator.
Glossary
Amount financed: what you borrow after the down payment and trade-in. Down payment: cash paid toward the car at purchase. Trade-in value: what the dealer credits for your current car. Payoff: what is still owed on the car you trade in. Negative equity: a payoff larger than the trade-in value, sometimes called being upside down. APR: the yearly cost of the loan; in the US, the monthly rate times 12. Buyer's order: the dealer's itemized list of the price, taxes, fees and credits. Term: the number of monthly payments.
Frequently asked questions
What is the payment on a $35,000 car with a trade-in?
With $3,000 down, an $8,000 trade-in, 7% sales tax on the price less the trade-in and $900 of fees financed, the loan is $26,790. At 7.5% APR over 60 months that is $536.82 a month.
Does my trade-in reduce sales tax?
It depends on your state. Where it does, tax is charged on the price minus the trade-in value; on an $8,000 trade-in at 7% that saves $560. Use the toggle to see both cases.
How is the amount financed on a car calculated?
Price plus sales tax plus any fees you finance, minus the down payment and the trade-in value, plus anything still owed on the trade-in. The panel beside the result lists each line.
What happens to negative equity on a trade-in?
The payoff is added to the new loan and the trade-in value is subtracted, so the shortfall is financed. Owing $10,000 on an $8,000 trade-in raises the default loan to $36,790 and the payment to $737.20.
Is a 72 or 84-month car loan more expensive?
In total, yes. On $26,790 at 7.5% APR, 84 months costs $7,726.64 of interest against $5,419.00 over 60 months, although the payment falls from $536.82 to $410.91.
How much does each point of APR add to a car payment?
On $26,790 over 60 months, moving from 7.5% to 10.5% APR adds $39.00 a month and $2,340.30 of interest. Moving down to 4.5% saves $37.37 a month.
Should I pay car fees up front or finance them?
That is your choice, and the calculator shows the cost of each. Financing $900 of fees at 7.5% over 60 months adds $18.03 a month and $182.05 of interest, while paying them up front raises the cash needed at signing.
How do I calculate a car payment in Excel?
Put the amount financed in a cell, then use =PMT(APR/12, months, -amount). For the default deal, =PMT(7.5%/12, 60, -26790) returns 536.82.
What sales tax rate should I enter?
Enter the combined state and local rate that applies where you register the car. The calculator does not hold state rates; the state's revenue department or your buyer's order gives the figure.
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Last reviewed 14 November 2026 by the NIFM Academy editorial team. Next review by 14 November 2027.
- Loan payment formula, fixed-rate annuity arithmetic, PMT = L x i / (1 - (1 + i)^-n), reproduced in the working under every result. Checked 14 November 2026.
- CFPB, Regulation Z, Appendix J to Part 1026, for a monthly unit-period there are 12 unit-periods a year, and the APR is the unit-period rate multiplied by the number of unit-periods in a year, so the monthly rate is the APR divided by 12. Checked 14 November 2026.
- Microsoft Support, PMT function, PMT(rate, nper, pv, [fv], [type]); the payment includes principal and interest but no taxes, reserve payments or fees. Checked 14 November 2026.