How to Calculate Auto Loan Monthly Payments

People commonly take out a loan from a bank, car dealer or other financial institution to finance the purchase of their vehicle. These loans use the car as collateral, meaning if you fail to make your payments, the car may be seized by the lender. To figure out whether a particular car fits in your budget, you need to calculate the cost of the monthly car loan payments.

Instructions

1

Convert the annual interest rate to a monthly interest rate by dividing the annual interest rate by 12. Do not use the annual percentage yield (APY). For example, if the annual interest rate on the car loan equals 9.6 percent, you would divide 9.6 by 12 to get 0.8 percent per month.

2

Convert the monthly rate from a percentage to a decimal by dividing by 100. In this example, you would divide 0.8 by 100 to get 0.008.

3

Multiply the monthly interest rate by the amount of money borrowed. Continuing the example, if you borrowed $19,000, you would multiply $19,000 by 0.008 to get $152.

4

Add 1 to the monthly interest rate. In this example, you would calculate 1 plus 0.008 to get 1.008.

5

Raise the result from step 4 to the negative Pth power, where P is the number of auto loan payments you will make over the course of the loan, using a scientific calculator. In this example, if you were going to repay the loan over 60 months, you would raise 1.008 to the -60th power to get 0.619966287.

6

Compute 1 minus the result from step 5. In this example, you would calculate 1 minus 0.619966287 to get 0.380033713.

7

Figure the monthly payment on your auto loan by dividing the result from step 3 by the result from step 6. In this example, you would divide $152 by 0.380033713 to find your monthly payment would be $399.96.