Buying a car involves more than just the sticker price. Your monthly payment depends on the loan amount, interest rate, term, down payment, trade-in value, and even your state's sales tax rules. This guide walks you through each factor.
Use our Auto Loan Calculator for instant results with all 50 state tax rules built in.
1. Determine the Total Loan Amount
Your loan amount isn't just the car's price. It's:
Car Price − Down Payment − Trade-In Value + Sales Tax + Dealer Fees + Registration
Example: A $35,000 car with $5,000 down, $3,000 trade-in, 7% sales tax ($2,450), $500 doc fee, and $300 registration:
Loan amount = $35,000 − $5,000 − $3,000 + $2,450 + $500 + $300 = $30,250
2. Sales Tax Varies by State
Some states allow you to deduct your trade-in value from the taxable amount:
- Trade-in deduction states: CA, NY, TX, FL, IL, PA, OH, GA, NC, MI, NJ, VA, WA, AZ, MA, TN, IN, MO, MD, WI, CO, MN, SC, AL, LA, KY, OR, OK, CT, IA, MS, AR, KS, UT, NV, NM, WV, NE, ID, HI, ME, NH, VT, RI, MT, DE, SD, ND, AK, DC
- Full-price tax states: States where you pay tax on the full car price regardless of trade-in
Our Auto Loan Calculator handles all state-specific rules automatically.
3. Interest Rates and Credit Scores
Your credit score has a huge impact on your auto loan rate:
| Credit Score | Typical APR (New) | Typical APR (Used) |
|---|---|---|
| 720+ (Excellent) | 5.5% – 7.0% | 6.5% – 8.5% |
| 680–719 (Good) | 7.0% – 9.0% | 8.5% – 11.0% |
| 620–679 (Fair) | 9.0% – 14.0% | 11.0% – 16.0% |
| Below 620 (Poor) | 14.0% – 21.0% | 16.0% – 25.0% |
A buyer with excellent credit financing $30,000 over 60 months at 6.89% pays $592/month and about $5,537 in total interest. At 14%, the same loan costs $698/month and $11,876 in interest.
4. Loan Term: Short vs Long
Common car loan terms and their trade-offs:
- 36 months: Highest payment, lowest interest, fastest equity
- 48 months: Balanced option
- 60 months: Most common, moderate payment
- 72–84 months: Lower payment but much more interest, risk of being underwater
On a $30,000 loan at 6.89%: 36 months = $925/mo ($3,299 interest), 60 months = $592/mo ($5,537 interest), 72 months = $509/mo ($6,643 interest).
5. Bi-Weekly Payments Save Interest
Paying half your monthly payment every two weeks results in one extra full payment per year. On a 60-month loan, this can save you hundreds in interest and shave months off the term. Our calculator includes a bi-weekly comparison option.
Calculate Your Auto Payment
Use our Auto Loan Calculator — includes all 50 states' tax rules, credit score rates, trade-in calculations, and a full amortization schedule.