Auto Loan Calculator

This Auto Loan Calculator is primarily designed for vehicle purchases within the United States. While users from other countries can still use it, they may need to adjust some inputs to fit their local context. If you only know the monthly payment and want to find out the actual car price or loan details, use the “Monthly Payments” tab for reverse calculations.

Understanding Auto Loans

Auto loans are one of the most common ways to finance a car. In the U.S., these loans typically come with terms ranging from 36 to 84 months. Borrowers repay the loan in monthly installments that include both the principal and interest. If payments are missed, the lender has the legal right to repossess the vehicle.

Types of Auto Financing: Direct Lending vs. Dealership Financing

When financing a car, buyers usually choose between:

• Direct Lending: This involves securing a loan from a bank, credit union, or financial institution before visiting a dealership. It gives you the flexibility to shop around for better interest rates and negotiate with more confidence.

• Dealership Financing: The loan is arranged through the dealership and often handled by a captive lender affiliated with the car manufacturer. While this is convenient, it may not always offer the best rates.

Direct lending puts buyers in a stronger position to negotiate since they aren’t locked into any one dealership. Dealership financing, on the other hand, is more convenient but may limit options when it comes to comparing rates.

Manufacturer Incentives: Low-Interest Rates & Rebates

To boost sales, carmakers often offer promotional financing through dealerships. These offers may include extremely low interest rates such as 0%, 0.9%, or 2.9%, especially on new models. It’s a smart idea to check with manufacturers first when shopping for financing options.

Additionally, some manufacturers offer cash rebates to encourage purchases. These rebates are typically applied to new cars and can lower the effective purchase price. However, in certain states, the full pre-rebate price is still used to calculate sales tax.

States like Alaska, Delaware, Montana, New Hampshire, and Oregon do not charge sales tax, while others like Texas, Pennsylvania, and Arizona don’t tax rebates. Check your local laws for details.

Common Car Buying Fees

Purchasing a car often involves more than just the sticker price. Additional fees may include:

• Sales Tax: Most U.S. states collect sales tax on car purchases. Some allow you to roll this into your loan.

• Documentation Fees: Charged by the dealer for processing paperwork such as title and registration.

• Title & Registration Fees: State fees required to register the vehicle in your name.

• Advertising Fees: Often embedded in the car’s price, these help dealers cover manufacturer promotions.

• Destination Charges: Covers the cost of shipping the vehicle from the manufacturer to the dealership.

• Insurance: Auto insurance is mandatory in the U.S., especially if you’re financing the car. Full coverage is typically required and may cost over $1,000 annually.

If these costs are included in your loan, be sure to select the “Include taxes and fees in loan” option on the calculator.

Tips for Getting the Best Auto Loan

1. Prepare Ahead of Time
Before visiting a dealership, determine your budget and research the type of vehicle you want. Compare offers from multiple lenders to find the best rates, and consider getting pre-approved to strengthen your negotiating power.

2. Know Your Credit Score
Your credit score plays a key role in loan approval and interest rates. Improving your credit score before applying can save you money in the long run.

3. Weigh Cash Rebates vs. Low Interest Rates
Auto buyers are often offered a choice between a cash rebate or a low-interest rate. While a rebate reduces the purchase price immediately, a low rate can save on interest over time. Use our Cash Back vs. Low Interest Calculator to compare options.

4. Consider Early Loan Payoff
Paying off your loan early can save you on interest, but check your loan terms to see if prepayment penalties apply.

Alternatives to Traditional Financing

Buy Used
New cars lose value quickly—sometimes 10% or more the moment you drive off the lot. Buying a lightly used car can be a smarter financial choice.

Lease Instead of Buy
Leasing is like renting a car long-term. It usually costs less upfront and may be a good fit if you enjoy driving new cars every few years. Use our Auto Lease Calculator to compare.

Use Public Transit or Carpool
Depending on your lifestyle and location, you might not need to buy a car at all. Public transportation, biking, or carpooling can offer huge savings.

Paying Cash for a Car

While most buyers finance their cars, paying in cash has its advantages:

• No Monthly Payments: You own the car outright with no financial obligations.

• No Interest: You avoid paying extra in interest over time.

• More Flexibility: You can sell, modify, or insure the car however you like.

• Encourages Smart Budgeting: Paying upfront prevents overspending.

• Possible Discounts: Some dealers offer cash-only incentives.

• Avoid Being “Underwater”: You won’t owe more than the car is worth.

That said, financing might still be worthwhile if you’re offered a very low interest rate and can invest your cash elsewhere for a better return—or if you’re working to build credit by making timely payments.

Trade-In Value and Tax Benefits

Trading in your current vehicle can help lower the cost of a new one. However, trade-in offers from dealers are usually lower than private sale prices.

In many states, you only pay sales tax on the price difference between the new car and your trade-in. For example, if you buy a $50,000 car and trade in a $10,000 vehicle, you’d pay tax on $40,000.

However, some states—including California, Kentucky, Michigan, and Virginia—don’t offer this tax reduction. The Auto Loan Calculator adjusts its tax calculations based on your state to reflect accurate results.