The sticker price is not what you finance: sales tax and fees are added on top, your down payment and trade-in come off, and anything you still owe on the trade-in goes back on. On a $35,000 car at 7% tax with $800 in fees and $5,000 down, you finance $33,250.00, pay $656.82 a month for 60 months at 6.9% APR, and spend $44,409.33 all-in.
How the amount financed is built — the dealer worksheet, line by line
Every line on a dealer's buyer's order does exactly one thing to the amount you borrow, and this calculator mirrors the worksheet so you can check theirs against yours before you sign:
- Start with the vehicle price — the negotiated price of the car, before anything else. Negotiate this number, not the monthly payment; everything downstream is arithmetic.
- Add sales tax — figured on the taxable amount, which in most states is the price minus your trade-in credit (see the toggle, and the next section). Tax is charged on the purchase, and if you don't pay it in cash, it goes into the loan and accrues interest like everything else in it.
- Add title, registration, and fees — the government's charges plus the dealer's doc fee, combined here into one field because they behave identically in the math.
- Subtract your down payment — cash you pay up front, which reduces the loan dollar for dollar.
- Subtract your trade-in equity — the trade-in's value minus what you still owe on it. Positive equity reduces the loan. Negative equity — owing more than the car is worth — makes this line negative, which adds to the amount financed. The equity always applies in full, whichever way the sales-tax toggle is set; the toggle changes only the tax.
The result is the amount financed, and the monthly payment is the standard amortization of that amount over your term at your APR. Total interest is where the loan's real price hides: it is computed from the unrounded payment, so multiplying the displayed payment by the term can differ from the displayed interest by a cent — that is rounding at display, not an error.
Worked example — clean purchase, no trade-in
The calculator is pre-filled with exactly this case: a $35,000 car, 7% sales tax, $800 of title, registration, and fees, a $5,000 down payment, no trade-in, 60 months at 6.9% APR.
- Taxable amount $35,000.00 → sales tax $2,450.00
- Amount financed: $35,000 + $2,450 + $800 − $5,000 = $33,250.00
- Monthly payment: $656.82 · total of payments $39,409.33 · total interest $6,159.33
- Out-the-door price: $35,000 + $2,450 + $800 = $38,250.00
- Total all-in cost: $38,250.00 + $6,159.33 = $44,409.33 — check it the other way: $39,409.33 of payments + $5,000 down + $0 equity = $44,409.33. The two routes always agree.
The trade-in tax credit — and why there is a toggle
In most US states, a trade-in reduces the taxable purchase price: trade in a $4,000 car on a $32,000 car and you pay sales tax on $28,000. That credit is worth real money — at 6.25%, it saves $250 of tax in that example. But it is not universal. California, Hawaii, Kentucky, Maryland, Michigan, and Virginia, plus the District of Columbia, are commonly listed as taxing the full price with no trade-in credit, and some states cap the credit at a maximum amount. (Montana appears on some lists, but it levies no general sales tax, so the point is moot there.) This page presents that as general guidance, not legal advice — rules change and local combined rates vary — which is why the mechanic is a toggle you control rather than a rule the page asserts about your state. Flip it off in the example above and watch the taxable amount rise to the full $32,000, the tax to $2,000.00, and the amount financed to $35,100.00.
Negative equity: rolling old debt into a new loan
Owing more on your current car than it is worth is common — loans amortize slowly at first while cars depreciate fast — and trading in does not make the shortfall disappear. It rolls into the new loan. Take a $32,000 car at 6.25% tax (credit on), $600 of fees, $2,000 down, and a trade-in worth $4,000 with $6,500 still owed: the equity is −$2,500, so the amount financed is $32,000 + $1,750 tax + $600 − $2,000 − (−$2,500) = $34,850.00 — more than the purchase itself required. At 9.0% APR for 60 months the payment is $723.43 and total interest is $8,555.72: you start this loan owing more than the purchase required, and you pay interest on the old car's leftover debt for the full new term. That is not an argument never to roll negative equity — sometimes the current car has to go — but it is an argument for seeing the number first, which is why this calculator displays negative equity on its own line instead of burying it.
Term length, and what the payment doesn't show
Stretching the term is the dealer's favorite lever because it always “works”: the same amount financed over 84 months costs less per month than over 36. What it costs more of is interest — every additional month is another month of interest on a slowly shrinking balance, and on a depreciating car a long term is also how buyers end up owing more than the car is worth, feeding the negative-equity cycle above. Run your own amount financed at two or three terms and compare the total-interest line, not just the payment. Finally, know what is not in any figure here: insurance, fuel, maintenance, and any payoff penalty on your current loan. The all-in cost is the all-in cost of the purchase and its financing — the cost of owning the car starts after that.