Calculator Methodology
This page describes the formulas and shared assumptions used by Finance Free Calculator’s car finance tools.
Fixed-rate loan model
Let P be the amount financed, n the number of monthly payments, and r the entered annual percentage divided by 1,200. Payment = P × r ÷ (1 − (1 + r)−n). At zero interest, payment = P ÷ n. For this estimate the entered APR is treated as the nominal interest rate. A disclosed APR that includes upfront finance charges may not reproduce a lender’s contractual payment.
Amortization and extra payments
Interest each month equals the opening balance multiplied by r. Principal paid equals payment minus interest. The next balance is the old balance minus principal paid. Extra payments reduce principal after that month’s interest. The final payment is capped at the remaining balance plus accrued modeled interest. Calculations retain precision internally and display cents; adding individually rounded rows may differ slightly from displayed totals.
Taxes, trade-ins, and fees
No state rate is selected automatically. The default 6% is illustrative. Tax = max(0, price − manual taxable price reduction) × tax rate + additional tax adjustment. Dealer fees, title costs, and add-ons are added after that tax calculation. Enter any tax due on them in the adjustment. Trade-in value reduces principal; payoff increases it. A trade-in does not automatically reduce the tax base. All entered purchase charges are financed unless already covered by down payment.
Comparison boundaries
Dealer comparisons include down payment and loan repayments. Loan-term comparisons hold APR constant. Rebate comparisons apply rebates after tax. Lease comparisons use the same horizon and include remaining debt and resale value. Cash comparisons discount loan installments at an assumed after-tax opportunity return; that return is not guaranteed.
What is not modeled
Daily interest, irregular due dates, variable rates, late fees, insurance, fuel, maintenance, tax deductions, and contract-specific penalties are excluded unless a calculator explicitly has an input for them. Amount financed is floored at zero when down payment or equity exceeds costs; excess funds are not modeled as a refund. A negative buy net cost can occur when the resale assumption exceeds modeled ownership cost.
Verification and sources
The shared loan model is checked against standard loans, zero-interest calculations, early payoff, and comparison consistency. The CFPB’s auto loan resources and the FTC’s financing guidance inform the explanations. These references are educational and do not endorse this site.