Methodology
Methodology & Data Sources
We'd rather you trust the math than take our word for it. Here's exactly how the Truth Machine calculates, where our figures come from, and the assumptions baked in.
How the calculator works
Monthly payments use the standard amortizing-loan formula — the same one lenders use:
Payment = P × r / (1 − (1 + r)−n)
where P is the amount financed, r is the monthly rate (APR ÷ 12), and n is the number of months.
From that we derive total interest (total of payments minus principal), the true cost of the car (down payment + all payments + insurance over the term), and the equity timeline — the month your declining loan balance crosses below the car's depreciating value. The negative equity figure is simply what you still owe on a trade-in minus what it's worth.
The assumptions
- Depreciation is modeled on typical industry curves; your specific vehicle will differ. We're showing the shape of the problem, not a guarantee for one VIN.
- APR by credit tier uses representative rates for each tier. Your actual offer depends on the lender, the vehicle, the term, and the market on the day you borrow.
- Insurance is included as a flat premium you enter, normalized to monthly, so the affordability picture reflects total transportation cost rather than the payment alone.
- Figures are estimates for education, not quotes. Always confirm real numbers with your lender.
Where our data comes from
Our market statistics are drawn from public, primary sources, including:
- Consumer Financial Protection Bureau (CFPB) — research on negative equity and auto lending.
- Federal Reserve Bank of New York — household debt and auto delinquency data (Liberty Street Economics and the Quarterly Report on Household Debt and Credit).
- Edmunds and Experian — industry reporting on trade-in equity, APRs, and loan terms.
We link each figure to its source where it appears, and we date our statistics so you can see how current they are.
We publish the formula and the sources on purpose. A tool that asks you to trust a scary number without showing its work is just a different kind of finance office. If a figure here matters to a real decision, click through to the source and verify it.
Corrections and updates
Rates, averages, and market conditions change, and we update figures as new data is published. If you spot a number that looks stale or wrong, tell us — we'd rather fix it than defend it. The “updated” date on each page reflects its last review.
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