What you actually finance
The amount financed is the price, less any trade-in, plus sales tax, less your down payment. Title, registration and dealer documentation fees come on top and vary by state and dealer.
A worked example
A $32,000 car with $3,000 down, 6.5% sales tax and an example APR of 7.0%. Sales tax is $2,080, so $31,080 is financed:
| Term | Monthly payment | Total interest |
|---|---|---|
| 48 months | $744.25 | $4,643.97 |
| 60 months | $615.42 | $5,845.28 |
| 72 months | $529.88 | $7,071.58 |
These are the starting values in our car payment calculator. The APR is an example, not a current rate.
The trade-off in the term
Stretching the loan from 48 to 72 months cuts the payment by about $214 a month and adds about $2,430 in interest. A longer loan also means more time owing more than the car is worth, which matters if you sell it or trade it in early.
Trade-ins and sales tax
Many states charge sales tax only on the price after the trade-in. Trading in an $8,000 car in the 60-month example cuts the tax from $2,080 to $1,560 and the payment to $446.72. Some states, California among them, tax the full price, so check your state's rule.
Beyond the payment
Insurance, fuel or charging, maintenance, tires and registration are part of the monthly cost of a car too. Get an insurance quote for the exact model before you sign, because it can differ a great deal between cars at the same price. This guide is general information, not financial advice.