Auto Loan Calculator

An Auto Loan Calculator is a helpful tool used to calculate monthly car loan payments based on the loan amount, interest rate, and loan term. It helps potential borrowers plan their finances and understand how much their monthly payments will be before committing to a loan.

Auto Loan Calculator What Does It Do?

The Auto Loan Calculator is used to determine the monthly payments for a car loan based on the loan’s amount, interest rate, and the length of the loan term.

Auto Loan Calculator Formula

The formula for calculating the monthly payment for an auto loan is as follows:

M = P [ r(1 + r)^n ] / [ (1 + r)^n – 1]

Where:
M = Monthly payment
P = Loan amount (principal)
r = Monthly interest rate (annual interest rate divided by 12)
n = Number of payments (loan term in months)

This formula helps determine the exact monthly installment for an auto loan based on the loan’s terms.

Auto Loan Calculator Example

Here are two examples showing how the Auto Loan Calculator works:

Example 1: Simple loan calculation

1. Loan amount: $15,000
2. Annual interest rate: 5%
3. Loan term: 5 years (60 months)

Steps:

1. Convert the annual interest rate into a monthly interest rate:
   Monthly interest rate (r) = 5% / 12 = 0.4167% or 0.004167
2. Use the formula to calculate the monthly payment:
   M = 15,000 * [ 0.004167 * (1 + 0.004167)^60 ] / [ (1 + 0.004167)^60 – 1 ]
   M ≈ $283.33

Thus, the monthly payment would be approximately $283.33.

Example 2: Different loan amount and interest rate

1. Loan amount: $25,000
2. Annual interest rate: 7%
3. Loan term: 4 years (48 months)

Steps:

1. Convert the annual interest rate into a monthly interest rate:
   Monthly interest rate (r) = 7% / 12 = 0.5833% or 0.005833
2. Use the formula to calculate the monthly payment:
   M = 25,000 * [ 0.005833 * (1 + 0.005833)^48 ] / [ (1 + 0.005833)^48 – 1 ]
   M ≈ $602.74

Thus, the monthly payment would be approximately $602.74.

The Auto Loan Calculator is a powerful tool that helps individuals understand their monthly payment obligations for an auto loan based on the loan amount, interest rate, and term length.