1. What is the Auto Loan Payoff Formula?

The Auto Loan Payoff formula calculates the remaining balance (RB) when making extra payments on an auto loan. It considers the monthly payment amount, interest rate, and remaining periods.

2. How Does the Calculator Work?

The calculator uses the payoff formula:

Where:

• \( RB \) — Remaining balance (payoff amount)
• \( PMT \) — Monthly payment amount
• \( r \) — Monthly interest rate (decimal)
• \( m \) — Number of remaining periods (months)

Explanation: The formula calculates the present value of the remaining payments, accounting for the time value of money.

3. Importance of Payoff Calculation

Details: Knowing your payoff amount helps when refinancing, selling your vehicle, or making extra payments to reduce interest costs.

4. Using the Calculator

Tips: Enter your regular monthly payment, monthly interest rate (annual rate ÷ 12), and remaining number of payments. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How do extra payments affect the payoff amount?
A: Extra payments reduce the principal faster, decreasing both the remaining balance and total interest paid.

Q2: Should I convert annual rate to monthly?
A: Yes, divide your annual rate by 12 (e.g., 6% annual = 0.005 monthly).

Q3: Does this account for payment timing?
A: This assumes payments are made at the end of each period (ordinary annuity).

Q4: Can I use this for other loans?
A: Yes, this formula works for any fixed-rate installment loan with extra payments.

Q5: Why is my payoff different from the lender's?
A: Lenders may include fees or use slightly different calculation methods.