What "including tax" means for the loan
The tax is calculated on the price, then added to the balance along with any fees. You then repay the car and the tax together, so the monthly payment is higher than on a tax-exclusive quote.
Because the tax is borrowed, it also attracts interest. Over a long term that can add a meaningful amount to the cost of the car.
Worked example
A £30,000 car at 8.25% sales tax carries £2,475 of tax. With a £3,000 deposit, the amount financed including tax is £29,475.
At 7% over 60 months the payment is £583.64, the interest is £5,543.42 and the total cost including the deposit is £38,018.42. Paying the £2,475 upfront instead would reduce the payment to £534.63.
When financing the tax makes sense
If paying the tax upfront would leave you without an emergency fund, financing it can be the safer choice even though it costs more. The important thing is to know the cost rather than discover it in the total.
Compare the extra interest with what the cash would otherwise earn or protect. For most buyers, paying the tax upfront is cheaper if the cash is available.
Inputs for the auto loan including tax calculator
Vehicle price before tax
The dealer price of the car, before sales tax.
Sales tax or VAT rate
The rate where you register the car.
Deposit or down payment
Cash or trade-in value paid upfront, taken off the tax-inclusive price.
Interest rate (nominal, not APR)
The yearly rate before monthly compounding, charged on the amount financed.
Term
How many months you will take to repay the loan.
CALCULATOR QUESTIONS
Auto loan calculator including tax questions
Does financing the tax cost more?
Yes. The tax is borrowed, so you pay interest on it for the whole term.
How much more per month is tax included?
In the example, including £2,475 of tax raises the payment from £534.63 to £583.64 a month over 60 months.
Can I include registration fees too?
Yes, in practice they are added to the balance in the same way. Enter them as part of the financed amount or use the fees calculator.
Is the tax always charged on the full price?
Not everywhere. Some states deduct a trade-in before charging tax, so check your local rules.