How to Calculate Car Payments

How to Calculate Car Payments

How to Calculate Car Payments. You’ve just seen the car of your dreams, but
you’re not sure if the price is right. In a few steps, you can calculate your potential
car payments and decide if you’ll be able to afford a new ride. You will need Scientific calculator Pen and
paper and online payment calculator (optional). Step 1. Convert your loan’s interest rate to a decimal
number by dropping the percent sign and dividing the number by 100. Step 2. Divide the interest rate on your car loan
by 12. Write this number on a piece of paper. Step 3. Multiply the number by the loan’s principal
amount — the total amount of your car loan. Write this number down, as it will be used
in your final calculation. Remember to subtract any down payment you
might make from the new car’s purchase price when figuring out the principal amount. Step 4. Recall the number you got from dividing the
interest rate by 12 in step 2. Add 1 to this number. Step 5. Take the sum from step 4 raised to the power
of the number of months included in the term of your loan. For example, if you will make 36 monthly payments,
multiply the sum from step 4 by itself 36 times. Step 6. Calculate 1 divided by the result from step
of your multiplication. Round this number to the nearest hundredths
place to make it easier to work with. Step 7. Subtract this number from 1. Jot this number down for use in your final
calculation. Avoid the math by using car payment calculators
found on many auto dealer and bank websites. Step 8. Divide the number from step 3 by the number
from step 7 for your final monthly car payment. Think about whether this will fit into your
monthly budget. If so, you might want to ride off in that
dream car. Did you know The Smithsonian Institute has
been collecting cars since 1899, and has more than 60 cars in its collection, including
a 1913 Model T Ford and a 1903 Cadillac.

About the Author: Michael Flood


  1. or you know, you could just use a payment calculator like the ones on every single dealership website

  2. Orrrrrrrrr….
    You could find out what the total of the car is.
    Then what your interest rate would be.
    So if it's 3.0 percent. × that by the total of the car…… then divide that by how many months your loan/lease is…..
    Much more sumple.

    So "total × interest " then add them
    Then divide that number by the total….

  3. Good information. Many people do not understand how to do this.  If they would take the time to learn it could save them many dollars!

  4. Step 6: How did you get .82 as an answer? I thought you were dividing 1.223/1 with an answer of 1.223. Now how am I suppose to follow from here if my answer is different than yours?

  5. Step 1: loan interest rate / 100 = a

    Step 2: a / 12 = b

    Step 3: b x principle amount = c

    Step 4: b + 1= d

    Step 5: d^(term loan) = e

    Step 6: 1 / e = f *round to the nearest

    Step 7: 1 – f = g

    Step 8: c / g = your monthly payment!

  6. some one explain step 5.
    .0056 x 36 = .2016
    1.0056 x 36 = 36.2016

    how the hell did he get? 1.223?

    he said Sum of step 4. x 36 = 1.223

    what is the "Sum of step four!!!???"

  7. Why can't the interest be purley a factor of the amount financed… for example: your interest rate is 4% your loan amount is $20k. that would be $800 in interest that would you would have to pay over the term of your loan… why doesn't this work?

  8. Easier way, before buying a car, get a pre-approved loan. From that you can make a list of payment amounts per $1000 of loan, the bank or credit union will give you that. For example, a 2% loan at 60 months has a monthly payment of $17.53 per $1000. if the amount financed is $25,500 the payment is 17.53 * 25.5 = $447

  9. Why would this video make somthing so simple seem so complicated ,
    Im glad i had watched a few videos and allready understood what the hell they are trying to teach me

  10. Or just use an online calculator. GOOGLE auto loan calculator. Very simple and very useful. You just input the amount financed, interest rate, and terms.

  11. So i watched this video and changed each of the numbers to a variable so i could create a step by step formula. Pulled this out during the negotiations and the sales people were like "uhhh ohhhh" ….. got the general manager. Lol

  12. My math gave me $307.58 with those terms and figures. Not sure I trust this method if the can't even do the math right. Looking to develop my own calculator in Excel for this for loan payments, this was no help since I can't trust it.

  13. So they financed a $10,000 and with tax and interest it went up to 11,200?

    I went in to finance a 8,000 car and at the dealers finance I was told it would 60 payments of 360ish which is around 22,000 so I got up slapped the finance leech and walk away

  14. Step 1: Use an online car payment calc with a "Gap" feature of $299 or add a "1" under Sales Tax Rate within the calculator and the monthly payment should come out the same.

  15. this math doesn't equal out to the same number the dealer gave me nor the number numerous car finance calculators gave me. Who's lying to me here?

  16. It worked, I did the math by myself with simples numbers and I compared it with an auto loan calculator app and got the same results.

  17. That moment when you forgot to change the percent to a decimal after a whole semester of stats, and you calculate the monthly payment of 4447 dollars

  18. Thank you. Knowing the math I can work backwards from the monthly I want, and determine the total loan and down payment needed.

  19. It's worth mentioning that the method presented in this video is actually incorrect for most car loans in the US. Car loans in the US are compounded continuously, not monthly like this video assumes.

  20. I just took the same numbers I got from the example from this video and plugged them into payment calculator and got completely different numbers

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