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 period. It accounts for the principal amount, interest rate, and loan term.

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)
• \( n \) — Total number of payments (loan term in months)

Explanation: The formula accounts for both principal repayment and interest charges, with the payment amount remaining constant throughout the loan term.

3. Importance of Loan Payment Calculation

Details: Calculating your monthly payment helps with budgeting and ensures the loan terms are affordable before committing to a purchase.

4. Using the Calculator

Tips: Enter the total loan amount in dollars, monthly interest rate as a decimal (e.g., 0.005 for 0.5%), and loan term in months. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How do I convert annual rate to monthly rate?
A: Divide the annual percentage rate (APR) by 12. For example, 6% APR becomes 0.06/12 = 0.005 monthly rate.

Q2: Does this include taxes and fees?
A: No, this calculates only the principal and interest portion. Additional costs like taxes, registration, or insurance are not included.

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

Q4: How does down payment affect the calculation?
A: Subtract your down payment from the car price before entering the principal amount.

Q5: Why does Yahoo use this formula?
A: This is the standard formula used by financial institutions worldwide for calculating fixed-rate loan payments.