How to Calculate a Car Payment

By the Tool Goodie Team · Updated July 6, 2026 · 4 min read

To calculate a monthly car payment, first find the amount you finance — vehicle price plus sales tax, minus your down payment and trade-in — then run it through the standard loan formula. The sticker price alone won't tell you the payment; tax, your cash down, and a trade-in all move it. Here's the two-step method with a worked example.

Key takeaways

Amount financed = price + sales tax − down payment − trade-in.
Payment = P × r × (1 + r)ⁿ ÷ ((1 + r)ⁿ − 1).
A trade-in lowers both the loan and (usually) the tax.
Skip the math with the car loan calculator.

Step 1: Find the amount financed

Start with the price, add the sales tax, then subtract what you're putting toward it:

Amount financed = price + sales tax − down payment − trade-in

In many places, sales tax is charged on the price after the trade-in is deducted, so a trade-in helps you twice — smaller loan and smaller tax bill.

Step 2: Apply the loan formula

Monthly payment = P × r × (1 + r)ⁿ ÷ ((1 + r)ⁿ − 1)

where P is the amount financed, r is the monthly rate (APR ÷ 12), and n is the number of months.

A worked example

A $35,000 car, $5,000 down, no trade-in, 13% sales tax, 7% APR over 60 months:

Sales tax = $35,000 × 13% = $4,550
Amount financed = $35,000 + $4,550 − $5,000 = $34,550
r = 7% ÷ 12 = 0.005833, n = 60

Plug those in and the monthly payment is about $684, with roughly $6,500 in total interest over the five years.

Let the tool do it: the free Car Loan Calculator handles price, down payment, trade-in, tax and APR and shows your monthly payment, amount financed, total interest and total cost instantly.

What moves your payment

Term. A longer term (72 vs 48 months) lowers the monthly payment but raises total interest.
APR. Even one point changes the total cost noticeably — shop rates and get pre-approved.
Down payment & trade-in. More cash up front means a smaller loan and less interest.

Thinking about leasing instead? See car loan vs lease and the car lease calculator.

Frequently asked questions

How do you calculate a monthly car payment?

First find the amount financed: vehicle price plus sales tax, minus your down payment and trade-in. Then apply the loan formula M = P × r × (1 + r)^n ÷ ((1 + r)^n − 1), where r is the monthly rate (APR ÷ 12) and n is the number of months.

Is sales tax added to the car payment?

Usually yes. Most buyers roll sales tax into the amount financed, so it is spread across the monthly payments. Paying tax up front instead lowers the amount financed and the monthly payment.

How does a longer term change the payment?

A longer term lowers the monthly payment but increases the total interest you pay. A 72-month loan has smaller payments than a 48-month loan on the same car, but costs more overall.

Disclaimer: This article is for general education only and is not financial advice. It assumes a fixed APR and equal monthly payments and ignores fees. Confirm exact figures with your lender.