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How to Calculate Monthly Car Loan Payments
If you are planning to buy a car and want to get a good deal you should do your car financing calculations ahead of time.
You can calculate your monthly car payments or estimate the total cost of your car purchase by using our online car payment calculator. However, if you are a person who prefers a more hands-on approach and want to work the numbers by yourself, read this article to find out how to calculate the car loan payments on your own.
To calculate your monthly payments you will need several figures:
- your car loan principal
- the interest rate of your car loan
- the number of monthly car payments (the term of your car loan)
And here is the actual formula for calculating the monthly car payments:
(P x (i / 12)) / (1 - (1 + i / 12)-n) = monthly car payment
In this formula:
- P is your car loan principal,
- i is your interest rate,
- n is the number of monthly payments.
To illustrate better how you can use this formula, consider the following example.
Let's assume that you have taken a car loan of $25,000 at 6% annual interest rate for a period of 36 months. This means that your calculations will look like this:
($25,000 x (6% / 12)) / (1 - (1 + 6% / 12)-36) =
= (25,000 x (0.06 / 12)) / (1 - (1 + 0.06 / 12) -36) =
= (25,000 x 0.005) / (1 - (1 + 0.005) -36) =
In other words your monthly car payments will be $760.55 before taxes and fees.
However, this formula does not take into account the cash you have for down payment, the sales tax you will be charged and any additional fees you may have to pay. Therefore, in order to make more precise calculations about your monthly payments and include these factors, you can use our car payment calculator.
The information and interactive car payment calculators that are provided on this site are made available as general assistant guidance in regards to car loans and payments. We do not guarantee that any information or calculations will be accurate or applicable to your personal financial situation, circumstances, or objectives. Accordingly, before making any final decisions we encourage you to consult a qualified professional and get personalized advice.
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