The number the advertisement leaves out
A vehicle may be advertised at one price while the retail installment contract finances a different figure. Sales tax and rolled-in fees increase the balance. Cash down, trade value, and a rebate reduce it. An unpaid balance on the traded vehicle increases it again. This calculator exposes that bridge before it calculates a payment.
Vehicle price + estimated sales tax + financed fees + trade payoff - cash down - trade allowance - rebate
The estimate applies the entered tax rate to the full vehicle price. It does not assume a state-specific trade-in or rebate tax credit. Replace the estimate with the actual tax and itemized fees on the buyer's order when available.
Trade equity is two numbers, not one
The trade-in allowance is what the dealer credits for the old vehicle. The payoff is the amount required to satisfy its current loan. If a dealer offers $12,000 for a trade with a $9,000 payoff, the buyer has $3,000 of positive trade equity. If the payoff is $15,000, the same allowance creates $3,000 of negative equity that may be carried into the new loan.
Entering only the trade allowance makes a negative-equity deal look cheaper than it is. That is why this page keeps trade allowance and trade payoff in separate fields.
Taxes, fees, rebates, and add-ons need separate lines
Tax treatment is not uniform across U.S. jurisdictions. Some states reduce the taxable base for a trade, some treat manufacturer and dealer rebates differently, and local rates may apply. Registration, title, documentation, delivery, warranties, service contracts, and protection products can also be handled differently. The calculator therefore treats the entered tax as an estimate and the fee field as a dollar amount supplied by the user.
Do not combine taxes, government charges, dealer fees, optional products, and negative equity into one unexplained line. A written itemization makes it possible to identify what can be negotiated, removed, or paid in cash.
How the payment and interest are calculated
After the amount financed is known, the page uses the standard fixed-payment amortization formula:
M = P × [r(1 + r)n] / [(1 + r)n - 1]
P is the modeled loan balance, r is the contract annual interest rate expressed as a decimal and divided by 12, and n is the number of monthly payments. At 0% interest, the payment is P divided by n.
Each projected payment first covers that month's interest; the remainder reduces principal. The calculation assumes a fixed contract interest rate, equal monthly interest periods, on-time payments, and no fees after origination. A contract using daily simple interest can produce a different payoff when payment dates vary.
Use the interest rate for the payment; compare APR separately
The CFPB's auto-loan key terms distinguish the interest rate from annual percentage rate (APR): APR includes certain borrowing fees as well as interest. This calculator already adds the financed fees you enter to the modeled balance. Using a fees-inclusive APR as the interest rate can therefore overstate the payment when those fees are also in the balance. Enter the contract's fixed annual interest rate, and use the lender's disclosed APR and finance charge to compare the wider cost of credit.
The modeled balance is the amount borrowed for the itemized deal. It may differ from the Truth-in-Lending disclosure's “amount financed” when prepaid finance charges apply. If the offer supplies only APR, ask for the contract interest rate and scheduled payment; this tool does not reconstruct a compliant APR disclosure from fees and payment dates.
Worked comparison: the lower payment costs more
Assume two written offers borrow the same $34,000. Offer A has a 5.9% contract interest rate for 60 months. Offer B has a 6.9% contract interest rate for 72 months. With equal monthly payment periods and no additional borrowing fees, the longer offer lowers the required payment by about $77.70, but it keeps the buyer in debt for another year and adds about $2,274 in interest. If either offer has borrowing fees, compare its disclosed APR separately.
| Offer | Interest rate and term | Payment | Total interest |
|---|---|---|---|
| A | 5.9%, 60 months | $655.74 | $5,344 |
| B | 6.9%, 72 months | $578.03 | $7,619 |
The payment difference may matter to a household budget, but it is not evidence that Offer B is cheaper. Comparing the amount financed, APR, term, and total interest together prevents the monthly payment from carrying the entire decision.
What the extra-payment estimate can and cannot tell you
The extra-payment field models the same additional principal amount every month beginning with payment one. It assumes the lender accepts prepayment without penalty and applies the entire extra amount immediately to principal. The projected payoff time and interest saved are differences between that model and the same loan with no extra payment.
Actual results can differ when a lender advances the next due date instead of reducing principal, calculates interest daily, charges a prepayment penalty, or receives extra payments on different dates. Ask the lender how to designate principal-only payments and check the next statement. Do not treat the projected savings as a promise.
Five checks before signing
- Match the negotiated price to the buyer's order and remove optional products you did not choose.
- Verify the trade allowance and obtain a current payoff quote for the old loan.
- Compare the buyer's order amount financed with the figure produced by your itemized inputs.
- Read the APR, finance charge, total of payments, number of payments, and any prepayment terms in the contract.
- Keep enough cash for registration, insurance, maintenance, and emergencies instead of using every available dollar as a down payment.
Primary sources
The CFPB identifies APR, interest rate, loan length, amount financed, and monthly payment as figures to compare rather than focusing on payment alone.
Definitions for amount financed, APR, finance charge, negative equity, principal, and other contract terms used on this page.
Consumer guidance on written pricing, financing terms, add-ons, and comparing total cost before signing.
Frequently asked questions
Sales tax, lender or dealer fees, optional products, and an unpaid balance on a trade can be added to the loan. Cash down, trade value, and rebates reduce the estimated amount financed.
Not necessarily. The calculator subtracts the trade allowance but adds the trade payoff. If the payoff is larger than the allowance, the difference is negative equity added to the new loan.
No. This calculator applies the entered rate to the vehicle price. Trade-in credits, rebates, taxable fees, local rates, and exemptions are handled differently by jurisdiction, so a buyer should replace the estimate with the tax shown on a written buyer's order.
No. The projection assumes each extra amount is applied immediately to principal every month with no prepayment penalty. Lender posting rules, daily interest, skipped payments, late fees, and payment timing can change the actual payoff.
Scope and responsibility
This page is educational. Real offers can vary based on credit profile, taxes, dealer structure, add-on products, and lender rules.
MyCalcVault is not a bank, lender, broker, accounting firm, law firm, or licensed advisory practice. The content is educational and general. It is not individualized financial, investment, legal, or tax advice.