How a car payment is worked out
Two steps. First the amount financed: the price, plus sales tax, less your deposit and any trade-in. Then that amount is amortized over the term at your rate — the same arithmetic as a mortgage, over a much shorter period.
Worked example: $30,000 car, 10% down
A 10% deposit of $3,000 leaves $27,000 to finance. At 7.2% over 5 years that is $537.18 a month, and $5,231 of interest across the term — you repay $32,231 in total.
What the term does to the same car
| Term | Monthly payment | Total interest | Extra interest vs 3 years |
|---|---|---|---|
| 3 years | $836.15 | $3,102 | — |
| 4 years | $649.06 | $4,155 | $1,053 |
| 5 years | $537.18 | $5,231 | $2,130 |
| 6 years | $462.92 | $6,330 | $3,229 |
| 7 years | $410.15 | $7,452 | $4,351 |
On $27,000 financed at 7.2%. The lowest monthly payment is reliably the most expensive car.
Payments by car price
| Car price | Financed at 10% down | Monthly over 5 years |
|---|---|---|
| $10,000 | $9,000 | $179.06 |
| $15,000 | $13,500 | $268.59 |
| $20,000 | $18,000 | $358.12 |
| $25,000 | $22,500 | $447.65 |
| $30,000 | $27,000 | $537.18 |
| $35,000 | $31,500 | $626.71 |
| $40,000 | $36,000 | $716.25 |
| $45,000 | $40,500 | $805.78 |
| $50,000 | $45,000 | $895.31 |
| $60,000 | $54,000 | $1,074.37 |
| $70,000 | $63,000 | $1,253.43 |
| $80,000 | $72,000 | $1,432.49 |
At 7.2%, before sales tax. Open any price for its own breakdown.
Frequently asked questions
What is the monthly payment on a $30,000 car?
With 10% down at 7.2% over 5 years, about $537.18 a month on $27,000 financed. Total interest comes to $5,231.
Is a longer car loan a bad idea?
It lowers the payment and raises the cost. On this example, stretching from 3 years to 7 years drops the payment from $836.15 to $410.15, but total interest rises from $3,102 to $7,452 — $4,351 more. Long terms also keep you in negative equity for longer, because cars depreciate faster than the loan amortizes.
How is sales tax handled on a car loan?
Most states charge sales tax on the price after any trade-in credit, and the tax is normally financed along with the car rather than paid up front. Enter your local rate in the options above and the tax is added to the amount financed.
Does a trade-in reduce the tax?
In most states, yes — the taxable amount is the price minus the trade-in allowance, so a trade-in reduces both the loan and the tax on it. A few states tax the full price regardless; check your state.
Related tools
- Amortization schedule — every payment on this loan, with CSV export
- Paycheck calculator — the take-home pay the payment comes out of
- Mortgage calculator — the same engine over a longer term