Car Loan Calculator
How the Car Loan Calculation Works
The car loan calculator helps determine your monthly payment and the total amount you will pay over the life of your loan based on the loan amount, term, and interest rate.
Formula:
Monthly Payment = [r * P] / [1 - (1 + r)^-n]
Car Loan Calculator: Calculate Your Monthly Payments
Use our Car Loan Calculator to estimate your monthly payments on a car loan. Whether you're buying a new or used car, this tool helps you quickly understand how much you'll need to pay each month based on your loan amount, interest rate, and loan term.All Calculator
What is a Car Loan?
A car loan is a type of installment loan specifically used to finance the purchase of a vehicle. The loan amount, interest rate, and loan term (the length of time you’ll repay the loan) determine the monthly payments you will make. Understanding these variables is essential before purchasing a car, as they will directly impact your budget and financial planning.
How to Use the Car Loan Calculator
- Enter the Loan Amount: The total amount you plan to borrow for the car purchase.
- Enter the Interest Rate: The annual interest rate (APR) on the car loan.
- Enter the Loan Term: The loan duration in months (typically 36, 48, 60, or 72 months).
- Click "Calculate": The calculator will instantly compute your monthly payment based on the provided values.
- Review the result: Plan your finances accordingly with the result displayed.
Car Loan Formula
The formula for calculating your monthly car loan payment is:
M = P × r(1 + r)^n / ((1 + r)^n - 1)
Where:
- M: The monthly payment.
- P: The loan principal (the amount you are borrowing).
- r: The monthly interest rate (annual interest rate divided by 12).
- n: The number of payments (loan term in months).
Example Calculations of Car Loan Payments
Example 1: $20,000 Loan for 60 Months at 5% Interest
Let’s say you’re financing a $20,000 car loan with a 5% annual interest rate for 60 months (5 years).
Loan Amount: $20,000
Interest Rate: 5% (0.05 annual, or 0.004167 monthly)
Loan Term: 60 months
Using the formula or our calculator, your monthly payment will be approximately $377.42.
Example 2: $15,000 Loan for 48 Months at 6% Interest
For a $15,000 loan at a 6% annual interest rate over 48 months:
Loan Amount: $15,000
Interest Rate: 6% (0.06 annual, or 0.005 monthly)
Loan Term: 48 months
The monthly payment in this case would be about $354.80.
Example 3: $30,000 Loan for 72 Months at 4% Interest
If you’re financing a $30,000 car loan with a 4% annual interest rate for 72 months:
Loan Amount: $30,000
Interest Rate: 4% (0.04 annual, or 0.00333 monthly)
Loan Term: 72 months
The monthly payment would be approximately $452.97.
Factors That Affect Your Car Loan Payment
- Loan Amount: The more you borrow, the higher your monthly payments will be. A larger loan amount means you’re financing a higher-priced vehicle.
- Interest Rate: A higher interest rate increases your monthly payments, as more of your payment goes toward interest.
- Loan Term: A longer loan term results in lower monthly payments but can increase the total interest paid over the life of the loan.
- Down Payment: A larger down payment reduces the loan amount, which in turn reduces your monthly payment.
- Credit Score: Lenders offer better interest rates to borrowers with higher credit scores, potentially lowering monthly payments.
Why Use the Car Loan Calculator?
- Budget Planning: The calculator helps you estimate your monthly payments before you commit to a loan, allowing you to plan your finances accordingly.
- Loan Comparison: Use the calculator to compare different loan scenarios, including varying interest rates, loan amounts, and terms, to find the best deal.
- Understanding Costs: It gives you a clear picture of the total cost of your car loan, including interest paid over the life of the loan.
- Making Informed Decisions: Knowing your monthly payment upfront can help you avoid surprises and make better financial decisions when purchasing a car.
