How Do I Manually Calculate an Auto Loan?

The longer the term of the car loan, the more interest you will pay.

Buying a car often requires taking out a loan to finance a portion of the costs. To calculate your monthly payment, you need to know your loan term, the interest rate and the amount you borrowed. The longer your loan, the smaller your monthly payment will be but the larger the total amount of interest you will pay over the life of the loan. Knowing how much you will pay each month will help you figure out if the loan will fit your budget. You will need a scientific calculator to raise a number to a power.


Step 1

Determine the number of payments you will make on your car loan by multiplying the number of years in the term of the loan by 12. For example, a five-year car loan has 60 monthly payments.

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Step 2

Divide the annual interest rate by 12, the number of payments you will make per year. For example, if the annual interest rate is 8.22 percent, then divide 8.22 by 12 to get 0.685. Divide that number by 100 to convert the interest rate to a decimal from a percentage. In this case, divide 0.685 by 100 to get 0.00685.


Step 3

Add 1 to the number you determined in Step 2. In the example, add 1 to 0.00685 to get 1.00685.

Step 4

Raise the result from Step 3 result to the Mth power, where M is the number of monthly payments from Step 1. In this example, you raise 1.00685 to the 60th power to get 1.50621325.


Step 5

Subtract 1 from the result in Step 4. Continuing the example, you subtract 1 from 1.50621325 to get 0.50621325.


Step 6

Divide the monthly interest rate from Step 2 by the result from Step 5. In the example, you divide 0.00685 by 0.50621325 to get 0.01353185.


Step 7

Add the monthly interest rate from Step 2 to the result from Step 6. In this example, you add 0.00685 to 0.01353185 to get 0.02038185.

Step 8

Multiply the amount borrowed by the result from Step 7 to find the monthly payment. Finishing the example, if you borrow $13,400, then multiply $13,400 by 0.02038185 to find the monthly car payment to be $273.12.

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