Calculate monthly auto payment with down payment, trade-in value and sales tax. See total interest and true cost of financing.
On a $35,000 car with $5,000 down at 6.5% for 5 years ($30,000 financed), the monthly payment is $587. Total interest is about $5,222. Adding a $3,000 trade-in reduces the financed amount to $27,000 and saves ~$1,750 in interest.
| Term | Monthly | Total Interest | Total Paid |
|---|---|---|---|
| 3 Years | $918 | $3,056 | $33,056 |
| 4 Years | $711 | $4,118 | $34,118 |
| 5 Years | $587 | $5,222 | $35,222 |
| 6 Years | $505 | $6,356 | $36,356 |
| 7 Years | $447 | $7,528 | $37,528 |
| Vehicle Type | Typical Rate | Monthly | Total Interest |
|---|---|---|---|
| New car (excellent credit) | 5.5% | $573 | $4,396 |
| New car (good credit) | 6.5% | $587 | $5,222 |
| Used car (excellent credit) | 7.5% | $601 | $6,076 |
| Used car (good credit) | 8.5% | $615 | $6,940 |
| Used car (fair credit) | 12% | $668 | $10,073 |
A car loan (auto finance) is a secured loan where the vehicle acts as collateral. Because it's secured, rates are lower than personal loans — typically 5-8% for new cars with good credit. The loan amount is the vehicle price minus your down payment and trade-in value, plus any sales tax you choose to finance. Most financial experts recommend keeping your car loan to 5 years or less to avoid being "underwater" (owing more than the car is worth as it depreciates).
A 20% down payment on a new car (10% for used) is the recommended minimum. This prevents negative equity, helps you qualify for a better rate, and keeps monthly payments manageable. Use our Personal Loan Calculator to compare financing options, or the Budget Planner to make sure the payment fits your budget.
At 6.5% for 5 years with $5,000 down ($30K financed): ~$587/month. Total interest ~$5,222. A 3-year term: ~$918/month, saves ~$2,700 in interest.
New cars: 5-7% (excellent credit), 7-10% (good). Used: add 1-3%. Average new ~6.5%, used ~8.5%. 0% sometimes available from manufacturers on new cars.
3-year saves ~$2,700 interest on $30K at 6.5% but costs $331/month more. Avoid 6-7 year loans — the car depreciates faster than you pay it off.
Trade-in reduces the financed amount. $3,000 trade-in on a $35K car with $5K down = $27,000 financed instead of $30,000 — saving ~$1,750 in interest over 5 years.
If market returns (7%+) beat the loan rate (6.5%), financing and investing is rational. For rates above 5-6%, cash saves guaranteed money. For 0% financing, always take the loan.
In most US states, tax (4-10%) is on the price minus trade-in. If financed, it adds to the loan, increasing payments and interest. Enter your state's rate above to see the impact.
20% for new, 10% for used. This prevents being underwater, gets a better rate, and keeps payments manageable.
Cars depreciate ~20% in year 1 and ~60% over 5 years. Loans longer than 5 years risk negative equity — you owe more than the car is worth.
Covers first-year depreciation immediately. Gets you a better rate and prevents being underwater from day one.
Pre-approval from your bank gives you a baseline rate to negotiate against. Dealer financing may beat it, or you use your pre-approval as leverage.
Dealers stretch terms to lower the monthly payment — but a 7-year loan at $447/month costs $7,528 in interest vs $5,222 for 5 years. Always compare total cost.
In most US states, sales tax is calculated on price minus trade-in value. A $3,000 trade-in on a $35K car in a 7% tax state saves $210 in tax.
CPO cars are 20-30% cheaper than new with manufacturer warranty. Financing rates are between new and used — often the best value for money.