How the payment is worked out
The amount financed is the price, plus state sales tax and fees, less the down payment and the trade-in. The monthly payment then follows the same formula as a mortgage: a fixed payment that clears interest and principal by the end of the term. Because the tax and fees are usually rolled into the loan, you pay interest on them too.
A $35,000 new car in California with $4,000 down and $500 of fees, at 7% for 60 months, carries $2,538 of state tax. The amount financed is $34,038, the payment $673.98 a month, and total interest $6,402. A local district tax can add to the state rate; enter it in the calculator if your county or city has one.
How states tax a car purchase
Most states charge sales tax on the price less the trade-in, so a trade-in saves tax as well as cash. A few tax the full price, a few charge a one-time title tax on the car's book value, and some cap the tax. The same car financed for 60 months:
| State | State vehicle tax | Monthly payment |
|---|---|---|
| Oregon | $175 | $627.20 |
| Texas | $2,188 | $667.05 |
| California | $2,538 | $673.98 |
| Illinois | $2,188 | $667.05 |
The rules can turn on details. In Ohio the trade-in credit is applied here to new cars only, so a $10,000 trade-in leaves $1,438 of tax if the car is new and $2,013 if it is used. Where a state's rule has not been confirmed on its own site, the result says so; your dealer's buyer's order shows the exact figure.
Loan length
| Months | Payment | Total interest |
|---|---|---|
| 36 | $1,050.98 | $3,798 |
| 48 | $815.07 | $5,086 |
| 60 | $673.98 | $6,402 |
| 72 | $580.31 | $7,744 |
| 84 | $513.72 | $9,115 |
Longer loans lower the payment but cost more and leave you owing more than the car is worth for longer, which hurts if it is totaled or you want to sell early.
New or used, and the total cost
Used cars cost less up front but often carry higher loan rates, and some states tax them differently, so compare the total cost rather than the sticker. Add up the down payment, every monthly payment and any trade-in you give up: on the California example over 60 months that is $44,439 in cash and payments for a $35,000 car, before insurance, fuel and repairs. A car that keeps its value better can be the cheaper choice even at a higher price.
A good rule is to keep all car costs, payment included, to a share of take-home pay that still leaves the savings bucket in the budget calculator intact. Paying off the loan early saves interest at the loan's rate, as long as the lender charges no penalty.
What the inputs mean
- Price, new or used: the agreed price before tax and fees; some states treat new and used cars differently.
- Down payment and trade-in: cash and the value of your old car.
- Fees: title, registration and dealer documentation fees.
- State and local rate: where you register the car.
- Rate and term: the rate and length of the loan you are considering.
Common mistakes
- Negotiating the monthly payment instead of the price. A lower payment over more months can hide a higher total.
- Leaving tax out of the budget. It is often thousands of dollars and usually financed.
- Rolling negative equity from the old car into the new loan.
Auto loan questions
What is the payment on a $35,000 car?
With $4,000 down at 7% for 60 months in California, about $673.98 a month, including $2,538 of sales tax financed with the car. Over 84 months the payment drops to $513.72, but interest rises from $6,402 to $9,115.
Does a trade-in lower the sales tax?
In most states, yes: tax is charged on the price less the trade-in. In California a $10,000 trade-in on the same car brings the tax to $2,538. A few states tax the full price, and Ohio, as applied here, gives the credit only on new cars.
How much does my interest rate matter?
Three points more, at 10%, raises the 60-month payment to $723.20 and total interest to $9,354. Asking a bank or credit union for its rate before visiting the dealer gives you a figure to compare.
Sources
Vehicle tax rules: state tax agency pages as of . How we calculate.