How the car payment is figured
Auto loans are simple-interest, fully amortizing loans, so the payment uses the same formula as a mortgage: Payment = L × r × (1 + r)^n ÷ [(1 + r)^n − 1], where L is the amount financed, r is the APR divided by 12 and n is the number of months. The amount financed is the vehicle price plus sales tax, minus your down payment and any trade-in credit. Fees rolled into the loan (documentation, title, extended warranty) would increase L.
Worked example with the default inputs: a $35,000 vehicle in a state with 6% sales tax adds $2,100 in tax. After a $5,000 down payment you finance $32,100. At 7.5% APR over 60 months the monthly payment is $643.22, total interest is $6,493.09, and the total cost of the car, counting the down payment, comes to $43,593.09. Stretching the same loan to 72 months lowers the payment to $555.01 but raises total interest to $7,860.91.
Term length, APR and the trade-in
Dealers often quote a monthly payment rather than a price, and a longer term makes almost any car look affordable. The cost shows up as extra interest and as time spent underwater, owing more than the car is worth. Sixty months is the most common term; 72 and 84 month loans usually carry higher rates and leave you paying on a vehicle that is out of warranty. If the only way a payment fits is an 84-month term, the car is probably too expensive for the budget.
Your APR depends on credit score, loan term, vehicle age and whether the lender is a bank, credit union or the manufacturer's captive finance arm. Manufacturer promotional rates of 0% to 2.9% are real but often require giving up a cash rebate, so compare the total cost both ways. Getting preapproved at a credit union before visiting the dealer gives you a rate to beat.
Many states, including Texas, Florida and Illinois, charge sales tax only on the price after the trade-in credit, which makes trading in worth more than the raw offer suggests. California and a handful of others tax the full price. This calculator taxes the full price; if your state gives the credit, reduce the tax rate proportionally or enter the tax as part of a lower price.
Reading the yearly summary
The table condenses the amortization schedule into one row per year: how much you paid, how much went to principal versus interest, and the balance left at year end. The interest share is front-loaded, so paying extra in the first year saves more than paying extra in the last. Most auto loans have no prepayment penalty, so rounding the payment up or making one extra payment a year shortens the loan and cuts interest. Confirm that extra amounts are applied to principal, not held as a prepayment of the next installment.