How to Calculate Car Payment From Total Price

Buying a car can be frustrating and confusing for anyone. One source of anxiety is haggling over a price and determining what your monthly payments will be. Once you understand how monthly payments are determined, you will be more empowered to get the best deal for you.

Things You'll Need

• Scientific calculator or online payment calculator

Instructions

1. Pick out a car you want to buy. Settle on a firm price that includes everything that is being financed such as fees for tags and taxes that may not be immediately obvious.

2. Subtract the amount of the down payment to get the total that will be financed.

3. Determine your interest rate and the length of the loan. The bank or finance company extending the car loan will give you the annual percentage rate, or APR, of its loan offer. You can shop around for loans by comparing APRs. Often, lenders will stretch out the length of the loan offer to reduce your monthly payments--but that results in a greater amount of interest you will pay.

4. Calculate your monthly payment with the formula (P* r/12)/(1-(1+r/12) ^-m), where P is the principal, r is the interest rate and m is the number of monthly payments. You can also use an online car-payment calculator.

References

• Calculating a Car Payment

Resources

• Auto payment calculator