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Car Loan & Negative Equity Calculator

The payment, the tax, and when you stop owing more than it is worth.

Inputs
$
$
$
7%
7.5%

Longer terms cut the payment and raise the total cost — and keep you underwater for longer.

Monthly payment
605.95$
Punishing

Expensive

Amount financed
30,240.00$
Sales tax added
2,240.00$
Total interest
6,116.85$
Total cost of the car
40,356.85$
Equity the day you drive away
1,440.00 underwater$
Above water from month
9 of 60
Financed = (price x (1 + tax)) − deposit − trade-in · payment amortised over the term

Depreciation is modelled as a tenth on driving away, a fifth by the end of year one, then 15% a year. It varies by model. Excludes insurance, registration and dealer fees.

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A car loan is financed on the price plus sales tax, less any deposit and trade-in. Because a car depreciates faster than a loan amortises, most buyers owe more than the vehicle is worth for the first two to three years.

How to use Car Loan Calculator

  1. Enter the price and what you are putting down. Use the agreed price before tax, then your cash deposit and any trade-in allowance.
  2. Set your sales tax, rate and term. Sales tax is charged on the vehicle price and is usually financed with it.
  3. Read the payment and the equity line. Beneath the payment, see the total interest and the month your balance finally falls below the car value.

About car finance

A car loan differs from other borrowing in one way that changes the whole picture: the asset falls in value faster than the debt falls. Sales tax is financed along with the car but adds nothing to what the car is worth, so a buyer with a small deposit is underwater the moment they leave the forecourt. Depreciation then does the rest — the conventional figures are around twenty percent in the first year and roughly fifteen percent of the remaining value each year after, which means a car bought for thirty-two thousand is worth somewhere near twenty thousand after two years. Meanwhile a level-payment loan repays very little principal early, because interest is charged on the highest balance at the start. Those two curves are why the equity line here matters more than the monthly payment. The gap between them is the amount you would have to find in cash to walk away, and it is also exactly what gap insurance exists to cover. Lengthening the term makes the payment look affordable and widens that gap for longer, which is the trade the finance desk is offering when it moves you from sixty months to eighty-four. The total cost line and the equity line together are the honest comparison; the payment on its own is not.

Frequently asked questions

What does it mean to be underwater on a car loan?
That you owe more than the car would sell for. It happens because a new car loses roughly a fifth of its value in the first year while the loan has barely amortised, and it matters if the car is written off or you want to sell.
Is a 72 or 84 month car loan a bad idea?
It lowers the payment and raises the total cost, and it keeps you underwater far longer — often for most of the term. If the payment only works over seven years, the honest reading is that the car is too expensive.
Is sales tax charged on the trade-in?
It depends on the state. Many reduce the taxable amount by the trade-in allowance, which is a real saving; some tax the full price. This calculator taxes the full vehicle price, which is the conservative assumption.
Does a bigger deposit change the interest rate?
Often, yes. A larger deposit lowers the loan-to-value ratio and lenders price that in, so a deposit can reduce both the amount borrowed and the rate charged on it.
What is gap insurance for?
It covers the difference between what an insurer pays out — the car value — and what you still owe, in a write-off. It is worth considering precisely for the period this calculator shows you underwater, and pointless after it.

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