1. What is the Auto Loan Payment Formula?

The auto loan payment formula calculates the fixed monthly payment required to repay a loan over a specified period. This is the standard formula used by NFCU (Navy Federal Credit Union) and most lenders for calculating auto loan payments.

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 payments (loan term in months)

Explanation: The formula accounts for both principal and interest payments over the life of the loan, with payments being equal each period.

3. Importance of Accurate Payment Calculation

Details: Understanding your exact monthly payment helps with budgeting and ensures you can afford the vehicle before committing to the loan.

4. Using the Calculator

Tips: Enter the loan amount in USD, monthly interest rate as a decimal (e.g., 0.005 for 0.5%), and number of monthly payments. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How do I convert APR to monthly rate?
A: Divide the annual percentage rate by 12 (months) and then by 100 to convert to decimal. Example: 6% APR = 0.06/12 = 0.005 monthly rate.

Q2: Does this include taxes and fees?
A: No, this calculates principal and interest only. Additional costs like sales tax, registration, and documentation fees would increase your total payment.

Q3: What's a typical auto loan term?
A: Common terms are 36, 48, 60, or 72 months. Longer terms mean lower payments but more interest paid overall.

Q4: How does NFCU's rates compare?
A: NFCU typically offers competitive rates for creditworthy borrowers, often lower than dealer financing options.

Q5: Can I calculate total interest paid?
A: Yes, multiply the monthly payment by number of payments, then subtract the principal: Total Interest = (PMT × n) - P