1. What is the Car Loan Payment Formula?

The car loan payment formula calculates the fixed monthly payment required to repay a car loan over a specified term. It accounts for the principal amount, interest rate, and loan duration.

2. How Does the Calculator Work?

The calculator uses the standard loan payment formula:

Where:

• \( PMT \) — Monthly payment amount
• \( P \) — Principal loan amount
• \( r \) — Monthly interest rate (annual rate ÷ 12)
• \( n \) — Number of monthly payments (loan term in months)

Explanation: The formula calculates the fixed payment that pays off the loan balance plus interest over the loan term.

3. Understanding Loan Payments

Details: Each payment consists of both principal and interest. Early payments are mostly interest, while later payments apply more to principal.

4. Using the Calculator

Tips: Enter the total loan amount (after any down payment), the annual interest rate (APR), and the loan term in months (e.g., 60 for 5 years).

5. Frequently Asked Questions (FAQ)

Q1: How does loan term affect payments?
A: Longer terms reduce monthly payments but increase total interest paid. Shorter terms have higher payments but lower total cost.

Q2: What's included in the principal amount?
A: This should be the total amount financed, including vehicle price minus down payment plus any fees rolled into the loan.

Q3: How accurate is this calculator?
A: It provides the base payment amount. Actual payments may vary slightly due to rounding or if lenders use different calculation methods.

Q4: Does this include taxes and insurance?
A: No, this calculates only the principal and interest payment. Actual car payments may include taxes, fees, and insurance.

Q5: What if I make extra payments?
A: Additional payments reduce principal faster, potentially saving interest and shortening the loan term.