Auto Loan Calculator Payment Nerdwallet Tool

Auto Loan Payment Formula:

\[ PMT = P \times \frac{r(1 + r)^n}{(1 + r)^n - 1} \]

Monthly Payment (PMT):

Unit Converter ▲

Unit Converter ▼

From:	To:

1. What is the Auto Loan Payment Formula?

The auto loan payment formula calculates the fixed monthly payment required to repay a car loan over a specified term. This is the same formula used by NerdWallet's auto loan calculator tool.

2. How Does the Calculator Work?

The calculator uses the standard loan payment formula:

\[ PMT = P \times \frac{r(1 + r)^n}{(1 + r)^n - 1} \]

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 accounts for both principal repayment and interest charges, spreading payments evenly over the loan term.

3. Importance of Loan Payment Calculation

Details: Calculating your exact monthly payment helps with budgeting and comparing different loan offers to find the most affordable option.

4. Using the Calculator

Tips: Enter the total loan amount in dollars, annual interest rate as a percentage, and loan term in months. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Does this include taxes and fees?
A: No, this calculates only the principal and interest portion. Your actual payment may be higher when including taxes, fees, and insurance.

Q2: 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.

Q3: How does interest rate affect payments?
A: Even a 1% difference in rate can significantly change your monthly payment and total loan cost.

Q4: Should I make a down payment?
A: A down payment reduces the principal amount borrowed, lowering both your monthly payments and total interest.

Q5: Are there prepayment penalties?
A: Most auto loans don't have prepayment penalties, but check your loan terms to be sure.