Work out your monthly car payment, factoring in your down payment, trade-in value, and sales tax.
Sales tax is applied to the vehicle price minus your trade-in value, which is how most U.S. states calculate it. That tax is added to the price, then your down payment and trade-in are subtracted to find the amount you're actually financing. The monthly payment then uses the standard fixed-rate amortization formula over your chosen term.
Some states don't reduce the taxable amount for a trade-in, and local tax rates vary, so treat this as a close estimate rather than exactly what the dealership will quote.
An auto loan is simply money borrowed from a bank, credit union, or dealership's finance arm to buy a vehicle, repaid in fixed monthly installments over an agreed term — usually somewhere between 2 and 7 years. Like any loan, each payment is split between principal (paying down what you borrowed) and interest (the cost of borrowing), though early payments lean more heavily toward interest.
A shorter loan term means higher monthly payments but far less interest paid overall, since the balance shrinks faster and there's less time for interest to accumulate. Stretching the same loan over a longer term lowers the monthly payment but usually costs noticeably more in total interest — worth weighing against how tight your monthly budget is.
Putting more money down, or trading in a vehicle with real equity, reduces the amount you need to finance. That shrinks your monthly payment, cuts total interest, and can also help you avoid being "upside down" — owing more than the car is worth — in the early years of the loan when depreciation is steepest.