This car mortgage calculator has been reviewed for financial accuracy and compliance with standard loan amortization principles.
Use our comprehensive Car Loan Payment Calculator to easily determine your monthly installment, understand total loan costs, and plan your purchase with confidence.
Car Mortgage Payment Calculator
Calculated Result:
Car Mortgage Calculator Formula
The standard formula for calculating the monthly payment (M) on an installment loan is based on the present value of an annuity. This is the primary formula used when solving for the monthly payment.
Monthly Payment (M) Formula:
M = P * [ i * (1 + i)^n ] / [ (1 + i)^n - 1 ]
Where:
- P = Principal Loan Amount
- i = Monthly Interest Rate (Annual Rate / 1200)
- n = Total Number of Payments (Term in Years * 12)
Formula Source: Investopedia: How to Calculate Your Mortgage Payment
Variables Explained
Understanding the key variables is essential for accurate calculations:
- Loan Principal Amount (P): The initial sum of money borrowed for the car. This is typically the car price minus any down payment or trade-in value.
- Annual Interest Rate (I): The cost of borrowing the principal, expressed as a percentage. This rate determines the total interest paid over the life of the loan.
- Loan Term (N): The length of time over which the loan will be repaid, expressed in years (e.g., 3, 5, 7). A longer term means lower monthly payments but higher total interest.
- Monthly Payment (M): The fixed amount paid to the lender each month, covering both principal and interest.
Related Calculators
What is a Car Mortgage Calculator?
A car mortgage calculator, often simply called a car loan calculator, is a financial tool that helps prospective car buyers estimate the costs associated with financing a vehicle. It takes into account the four key variables—loan amount, interest rate, term, and monthly payment—and calculates the unknown factor. This provides clarity on affordability before committing to a purchase.
The primary benefit of using this calculator is the ability to run multiple scenarios. Users can adjust the loan term or the down payment to see how it affects the required monthly payment, enabling smart budgeting. It is a foundational tool for ensuring that the total financing costs align with one’s personal budget and financial goals.
How to Calculate Your Monthly Payment (Example)
Follow these steps to calculate a monthly payment (M) for a $30,000 loan at 6% APR over 5 years:
- Determine Monthly Rate (i): Divide the Annual Rate (6% or 0.06) by 12: $i = 0.06 / 12 = 0.005$.
- Determine Total Payments (n): Multiply the Term in Years (5) by 12: $n = 5 \times 12 = 60$ months.
- Apply the Formula: Substitute P=30,000, i=0.005, and n=60 into the monthly payment formula.
- Solve the Exponent: Calculate $(1 + 0.005)^{60} \approx 1.34885$.
- Calculate Denominator: $(1.34885 – 1) = 0.34885$.
- Calculate Numerator: $30000 \times 0.005 \times 1.34885 \approx 202.3275$.
- Final Monthly Payment: $202.3275 / 0.34885 \approx \$580.08$.
Frequently Asked Questions (FAQ)
What is the difference between APR and Interest Rate?
The Annual Percentage Rate (APR) is the total cost of the loan, including the stated interest rate plus any fees (like origination fees). For car loans, they are often similar, but APR provides a more complete view of the borrowing cost.
Should I choose a 3-year or 7-year loan term?
A 3-year term results in a higher monthly payment but significantly less total interest paid. A 7-year term lowers your monthly payment but increases the total interest paid and means you will owe money on the car for a longer period.
Does the calculator include taxes and fees?
No. This calculator is based purely on the loan principal amount. Taxes, registration fees, and dealer fees must be added to the price of the car to determine the total principal amount you need to finance.
How accurate are the results from this calculator?
The results are highly accurate based on the standard amortization formula. Minor differences may occur with lender quotes due to rounding of the monthly interest rate or the specific day count convention they use.