How the amount financed is built
Amount financed = vehicle price − down payment − trade-in allowance + amount still owed on the trade-in + estimated sales tax + fees rolled into the loan. That amount is the principal passed to the payment formula. The payment itself is principal times the monthly rate, divided by one minus (1 + monthly rate) to the power of minus the number of months. At a 0% promotional rate it is the amount financed divided by the number of months.
The form opens on a $28,000.00 vehicle, $3,000.00down, no trade-in, and sales tax of 6% on the full price, which is$1,680.00. The amount financed is $26,680.00. At 6.5% for 60 months the contractual payment is $522.02, and scheduled interest over those 60 months is$4,641.52. Change any input and both the principal and the schedule update together.
The price and the financing are separate negotiations
The CFPB's auto-loan shopping guidance asks you to look past the monthly payment. Interest rate and APR, taxes and fees, optional add-ons, insurance, and maintenance all change what the vehicle costs to own. A larger down payment, a lower price, and fewer add-ons can reduce both the payment and the interest. This calculator includes the price, the down payment, a single fees line, and a sales-tax estimate. It does not price insurance, maintenance, or optional products such as a service contract. Those products are optional, and the CFPB says their prices can be negotiated if you choose to buy them.
Credit history is one of the factors lenders use to set the rate. The CFPB says a lower credit score makes a higher interest rate more likely. This page does not estimate a rate from a score. Type the rate from a quote. Getting that quote from more than one place is the point of the CFPB's comparison advice: a preapproval from a bank or credit union gives you a figure to set next to whatever the dealership offers.
Dealer-arranged financing
Dealer-arranged financing is indirect. The dealer collects an application and sends it to one or more lenders. The CFPB says interest rates through a dealer are generally higher because the rate offered to the buyer is the lender's buy rate plus additional interest that compensates the dealer for handling the financing. This calculator cannot see that split. It can only amortize the rate and the amount financed you enter. The CFPB's auto loan shopping sheet is a paper place to line up more than one offer before the payment on a single quote becomes the only number in the conversation.
Trade-in and a balance still owed
A trade-in allowance reduces the amount you need to borrow. A loan still open on that vehicle can erase the reduction and then some. The CFPB says to find the payoff amount, which can differ from the balance on a statement because of the way interest is calculated or because of unpaid fees, and to research the trade-in value before rolling anything into a new loan. If you owe more than the allowance, the difference is negative equity, and rolling it in makes the new loan more expensive.
On a $28,000.00 price with $3,000.00 down, an $8,000.00 trade-in allowance and$10,500.00 still owed, with 6% tax estimated after the trade-in, the amount financed is$28,700.00. The unpaid $2,500.00 is inside that principal, so you pay interest on it for the life of the new loan.
Sales tax is state law
There is no single federal rule for whether a trade-in reduces the taxable price of a car. The checkbox is only a switch between two estimates. With a $28,000.00 price, a $5,000.00 trade-in, and a 6% rate, tax after the trade-in allowance is $1,380.00 and tax on the full price is$1,680.00. The amount financed moves by the same $300.00. Check the rule where the car will be titled before treating either figure as the tax due.
Term length
The CFPB's negotiation guidance says a shorter term, meaning fewer monthly payments, reduces the cost of the loan overall, while a longer term can reduce the monthly payment and increase the interest you pay. A longer loan can also leave you in negative equity for longer, because the balance may stay above the vehicle's value. Sixty months is the opening term here because it is a common one, not because it is a recommended one. The rate, the term, and a prepayment penalty are all items the CFPB says shoppers can ask about. A penalty for paying the loan off early belongs in the contract, not in this schedule. Extra principal typed above is applied only if you choose to send it, and only until the balance is gone.