From vehicle deal to financed balance
The amount financed is vehicle price plus sales tax and dealer fees, minus the down payment and trade-in credit. That balance is then amortized at the stated annual rate over the selected term. The formula separates the purchase deal from the financing deal.
The default purchase arithmetic
The defaults start with a $35,000 vehicle: 7% tax adds $2,450, then a $5,000 down payment and $3,000 trade credit reduce the balance, while $800 of fees raises it to $30,250. At 6.9% for five years, the payment is $597.56 and modeled interest is $5,603.61.
Tax and trade-in treatment
This estimate assumes tax applies to the full vehicle price. Some jurisdictions tax a different base, and trade-in treatment varies. It also assumes the stated trade allowance is available without an outstanding payoff consuming part of that credit.
Payment can hide financed extras
A low advertised payment can hide a long term or a larger financed balance. Inspect the financed amount before comparing payments: accessories, protection products, negative equity, and document fees can change it more than a small rate difference.
Costs of driving that are separate
Registration, insurance, fuel, repairs, and lease-specific rules are not included. Negative equity from a prior loan requires a separate payoff figure; simply entering the trade value overstates the credit if money is still owed on that vehicle.
Comparing dealer offers
Use this page after the selling price, trade allowance, and fees are written down separately. It is most useful for testing whether a larger down payment or a shorter term changes the borrowing cost enough to justify the cash commitment.
Separate the old loan from the new car
A trade allowance is not automatically the amount available for the next purchase. If the old vehicle has a payoff balance, subtract that obligation from the allowance before treating it as equity. Keeping those two figures separate prevents negative equity from disappearing inside a dealership worksheet and makes the new financed amount auditable.
Ask for an out-the-door worksheet
A dealer worksheet should show selling price, taxable amount, trade allowance, payoff, fees, and financing separately. That is the fastest way to test whether the inputs used here describe the actual transaction.
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It is an educational estimate, not financial, tax, or legal advice.