How to Calculate Car Payments
You've just seen the car of your dreams, but you're not sure if the price is right. In a few steps, you can calculate your potential car payments and decide if you'll be able to afford a new ride.
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In the market for a new car? Don't even look at automobiles until you've checked out the advice in this Howcast video series.
You Will Need
- Scientific calculator
- Pen and paper
- Online payment calculator (optional)
Steps
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Step 1
Convert the interest rate percentage to a decimal
Convert your loan's interest rate to a decimal number by dropping the percent sign and dividing the number by 100.
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Step 2
Divide decimal number by 12
Divide the interest rate on your car loan by 12. Write this number on a piece of paper.
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Step 3
Multiply by your car loan principal
Multiply the number by the loan's principal amount -- the total amount of your car loan. Write this number down, as it will be used in your final calculation.
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Remember to subtract any down payment you might make from the new car's purchase price when figuring out the principal amount.
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Step 4
Add 1 plus the interest divided by 12
Recall the number you got from dividing the interest rate by 12 in step 2. Add 1 to this number.
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Step 5
Multiply sum by itself, using number of payments as exponent
Take the sum from step 4 raised to the power of the number of months included in the term of your loan. For example, if you will make 36 monthly payments, multiply the sum from step 4 by itself 36 times.
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Step 6
Calculate 1 divided by this sum
Calculate 1 divided by the result from step of your multiplication.
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Round this number to the nearest hundredths place to make it easier to work with.
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Step 7
Subtract sum from 1
Subtract this number from 1. Jot this number down for use in your final calculation.
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Avoid the math by using car payment calculators found on many auto dealer and bank websites.
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Step 8
Divide the first number by the second
Divide the number from step 3 by the number from step 7 for your final monthly car payment. Think about whether this will fit into your monthly budget. If so, you might want to ride off in that dream car.
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The Smithsonian Institute has been collecting cars since 1899, and has more than 60 cars in its collection, including a 1913 Model T Ford and a 1903 Cadillac.
