Auto Loan Calculator

What this calculator works out

An auto loan calculator shows the monthly payment on a car loan after you subtract any down payment or trade-in from the price. It uses the same amortization maths as a mortgage, just over a shorter term. Knowing the payment up front helps you set a realistic budget and avoid being talked into a longer loan than you need.

P is the car price, D is your down payment, r is the monthly interest rate, and n is the number of monthly payments.

How to use this calculator

1. Enter the car price or loan amount, then subtract any down payment to get the amount financed.
2. Enter the annual interest rate as a decimal or percent, depending on the calculator input format.
3. Enter the loan term in months, such as \(60\) for a \(5\)-year loan.
4. Click calculate to find the monthly payment, then review the breakdown if the tool shows one.

The formula explained

The formula computes the fixed monthly payment on an amortized auto loan, where each payment covers both interest and principal. It uses the amount financed, the monthly interest rate, and the total number of monthly payments to produce the payment amount.

• M = the monthly payment
• P = the car price or loan principal before the down payment
• D = the down payment
• r = the monthly interest rate
• n = the total number of monthly payments

Step by step method

1. Find the amount financed by calculating \(P - D\).
2. Convert the loan term to months and make sure the interest rate is monthly, not yearly.
3. Substitute the values into \(M = (P - D) \\times \\frac{r(1+r)^n}{(1+r)^n - 1}\), then evaluate the expression.

Worked example

Problem. You buy a car for \(25{,}000\), make a down payment of \(3{,}000\), get a monthly interest rate of \(0.005\), and choose a term of \(60\) months. What is the monthly payment?

1. First find the amount financed, \(25{,}000 - 3{,}000 = 22{,}000\).
2. Substitute into the formula, \(M = 22{,}000 \\times \\frac{0.005(1.005)^{60}}{(1.005)^{60} - 1}\).
3. Evaluating gives \(M \\approx 424.94\).

Tips and common mistakes

• Make sure the interest rate is monthly. If you are given an annual rate, divide by \(12\) first.
• The formula gives only the loan payment, so add insurance, taxes, or fees separately if you want the full monthly car cost.

Frequently asked questions