Up next in How to Buy a Car (27 videos)
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)
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.
Divide decimal number by 12
Divide the interest rate on your car loan by 12. Write this number on a piece of paper.
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.
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.
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.
Calculate 1 divided by this sum
Calculate 1 divided by the result from step of your multiplication.
Subtract sum from 1
Subtract this number from 1. Jot this number down for use in your final calculation.
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.