How the maths works
How to use it
- Enter the negotiated out-the-door price, not the sticker or the advertised monthly payment. Negotiating the payment instead of the price is how a longer term gets sold as a discount.
- Add your down payment and trade-in value separately.
- Set the term. Start at 48 months and only lengthen it if you genuinely have to — then look at what the interest figure did.
- Enter gross monthly income to get the third leg of the 20/4/10 check.
A worked example
A $30,000 car with $6,000 down at 6.98% over 60 months, with 7% sales tax, is $517 a month and $4,894 in interest. Stretch to 72 months and the payment drops to $444 — which feels better and costs $5,921, nearly a thousand dollars more, while leaving you underwater on the loan for longer. The lower payment is the more expensive car.
Where this sits in the Financial Literacy resource
A calculator tells you where you are. It does not tell you what to do next, and a number without a plan behind it tends to produce anxiety rather than progress. These stages are free, need no account, and cover the decision this calculator is measuring.
Common questions
What is the 20/4/10 rule for buying a car?
Put at least 20% down, finance for no more than 4 years, and keep the payment under 10% of your gross monthly income. The 20% stops you being underwater in year one, since a new car typically loses around 20% of its value immediately. The 4 years caps total interest. The 10% keeps the car from crowding out everything else — and it excludes fuel, insurance and maintenance, which frequently add 50–100% on top of the payment.
Is a 72 or 84 month car loan a bad idea?
It is usually a signal that the car is too expensive rather than that the term is too short. Long terms cost substantially more interest and keep you owing more than the car is worth for years, which becomes a real problem if it is totalled or you need to sell. If a 48-month term on a given car is unaffordable, the honest conclusion is a cheaper car.
What does being upside down on a car loan mean?
Owing more than the car is worth — also called negative equity. It happens most often with small down payments and long terms, because a new car depreciates faster early on than the loan balance falls. It matters because insurance pays what the car is worth, not what you owe, so a total loss can leave you paying for a car you no longer have. Gap insurance covers exactly that difference and costs far less than the exposure.
Should I buy new or used?
A car’s steepest depreciation happens in its first two to three years, so a certified pre-owned vehicle lets someone else absorb that while you still get a warranty. Used loans carry higher interest rates, which offsets some of the saving, but the lower purchase price usually wins. The exception is when new-car manufacturer financing is genuinely subsidised.
What this calculator is not
It is an educational model, not a projection and certainly not advice. It knows nothing about your income, your state, your debts or your benefits status, and it ignores taxes and fees unless the page says otherwise. If you receive SSI or SSDI some of this maths works differently and getting it wrong can cost you eligibility — start with the Disability Wealth Guide instead. Our sourcing and correction policy is on the editorial standards page.
Nothing here is stored. Every calculation runs in your browser. No numbers are transmitted, logged or saved to any server, and no account is required. Close the tab and it is gone.