1. What is the Car Loan Payment Formula?

The car loan payment formula calculates the fixed monthly payment required to pay off a car loan over a specified term, including interest. This is based on the amortization formula for installment loans.

2. How Does the Calculator Work?

The calculator uses the standard loan payment formula:

Where:

• \( Principal \) — Original loan amount
• \( Rate \) — Monthly interest rate (annual rate ÷ 12)
• \( n \) — Total number of payments (loan term in months)

Explanation: The formula accounts for compound interest over the life of the loan, calculating the fixed payment that will pay off both principal and interest by the end of the term.

3. Understanding Loan Payments

Details: Each payment consists of both principal and interest. Early payments are mostly interest, while later payments apply more to principal. The total interest paid depends on the loan amount, rate, and term.

4. Using the Calculator

Tips: Enter the loan amount in dollars, annual interest rate (APR) as a percentage, and loan term in months (e.g., 60 for 5 years). All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How does loan term affect payments?
A: Longer terms reduce monthly payments but increase total interest paid. Shorter terms have higher payments but lower total interest.

Q2: What's included in the principal amount?
A: Principal is the amount financed after any down payment, plus fees rolled into the loan.

Q3: How accurate is this calculator?
A: It provides standard amortized loan payments. Actual payments may vary slightly due to rounding or lender-specific calculations.

Q4: Can I calculate total interest paid?
A: Yes, multiply monthly payment by term months, then subtract principal: (Payment × n) - Principal = Total Interest.

Q5: Does this account for taxes and insurance?
A: No, this calculates principal and interest only. Actual car payments may include taxes, fees, and insurance if escrowed.