How to Calculate the Monthly Payments on Buying a Car

Several online calculators on the Internet allows you to calculate monthly payments on car loans. However, if you want to crunch the numbers yourself, you can follow a simple formula to find the monthly payment amount. Both methods allow you to tweak the interest rate and other inputs to see how changes affect the monthly payment amount. As long as you know the price, down payment amount, interest rate and loan term, you can perform simple calculations to find the monthly payments.

Instructions

Online Calculator

1

Launch your Internet browser.

2

Go to the web page of an online car loan calculator such as MSN Autos Affordability Calculator or Auto123.com Car Calculator (see Resources).

3

Enter the down payment, car price, interest rate and term of the loan. The online calculator will show the amount of monthly payment you have to make.

Manual Calculation

4

Write down the loan amount, annual interest rate and the loan term in months. The car price minus the down payment equals the loan amount.

5

Use letters to represent the various figures. P stands for principal amount or loan amount, r indicates interest rate and m signifies the number of months.

6

Plug the numbers into this formula: [ P ( r / 12 )] / [ 1 - (( 1 + r / 12 ) ^ -m )]. For example, if the loan amount is $15,000 at seven percent interest per annum and the loan term is three years, the calculation would be: [ 15,000 ( 0.07 / 12 )] / [ 1 - (( 1 + 0.07 / 12 ) ^ -36 )].

7

Perform the calculations according to the formula to obtain the amount of monthly payment. In the example, the monthly payment would be $463.16.