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 Yahoo's auto loan calculator tool.

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 monthly payments (loan term in months)

Explanation: The formula accounts for both principal repayment and interest charges, calculating a fixed payment that fully amortizes the loan over the term.

3. Importance of Loan Payment Calculation

Details: Understanding your monthly payment helps with budgeting and comparing loan offers. It shows the true cost of financing a vehicle purchase.

4. Using the Calculator

Tips: Enter the total loan amount (after down payment), annual interest rate (APR), 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. Taxes, registration, and other fees would be additional.

Q2: How does loan term affect payment?
A: Longer terms reduce monthly payments but increase total interest paid. Shorter terms have higher payments but lower total cost.

Q3: What's a good interest rate for auto loans?
A: Rates vary by credit score. As of 2023, rates range from 3-4% for excellent credit to 10%+ for subprime borrowers.

Q4: Should I make a down payment?
A: A down payment of 20% is typically recommended to avoid being "upside down" on your loan (owing more than the car's value).

Q5: How accurate is this calculator?
A: This provides the exact mathematical calculation, but actual lender offers may vary slightly based on their specific terms.