How to Calculate a Car Loan Payment

A car loan payment is based on the amount you borrow, the interest rate, and the number of months in the loan. The amount borrowed is usually the vehicle price plus taxes and fees, minus your down payment, trade-in value, and rebates.

The payment formula

The standard amortizing loan formula is: monthly payment = P x r x (1 + r)^n / ((1 + r)^n - 1). P is the principal, r is the monthly interest rate, and n is the number of monthly payments.

For example, if you finance $30,000 at 6.5% APR for 60 months, the monthly interest rate is 0.065 / 12. A longer term lowers the payment but usually increases total interest.

What changes the payment most?

• Price: every extra dollar financed increases the payment.
• APR: higher rates increase both monthly payment and total interest.
• Term: longer loans spread payment over more months but keep interest running longer.
• Down payment: more money down lowers the financed amount and reduces risk.

Why the payment is not the whole budget

The loan payment is only one part of ownership. Insurance, fuel, charging, maintenance, tires, registration, parking, repairs, and depreciation can easily add hundreds of dollars per month. A car that looks affordable on the loan payment may still be too expensive when these costs are included.

Open the calculator to test your own car price, APR, down payment, and loan term.