Question 1

How is my monthly car payment calculated?

Accepted Answer

We use the standard amortization formula: M = P × [r(1+r)ⁿ] / [(1+r)ⁿ−1], where P is the financed amount, r is the monthly interest rate (APR ÷ 12), and n is the number of months. Sales tax and fees are added to the principal before financing.

Question 2

Does my trade-in reduce sales tax?

Accepted Answer

In most U.S. states, yes — sales tax is calculated on (price − trade-in value). A few states (like California, Hawaii, Maryland, Michigan) tax the full price. Our calculator uses the trade-in-reduces-tax formula since that's the most common.

Question 3

What loan term should I pick?

Accepted Answer

Shorter terms (36–48 months) mean higher monthly payments but much less total interest. Longer terms (72–84 months) lower the monthly bill but you'll pay thousands more in interest and risk being upside-down on the loan. 60 months is the most common.

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