Calculate a Monthly Car Payment

Jean Scheid
Calculate Your Own Car Payment!

Need to know how to calculate a monthly car payment? Understanding how to calculate your monthly payment is a great tool when shopping for a new or used car to help you decide what you can afford. Here you'll find an online website to help you learn how to calculate a payment on your own with the help of a calculator or spreadsheet program like Excel.

How to Calculate a Monthly Car Payment

Online Help

You can find online calculators that are specific to car loans and monthly payments. MSN Autos offers a great tool where you input the down payment, purchase price, interest rate, and length of loan or loan term. However, keep in mind that your interest rate will depend on your credit score. Get a free copy of your credit report and check out your credit score annually by visiting the Federal Trade Commission instead of joining a credit report company that requires you to enroll in a monthly program for a fee.

Steer clear of dealership websites that offer a free monthly payment calculator. Dealers use these to encourage you to not only visit their website and dealership, but also to obtain information from you like your email address, phone number, and name.

Calculate On Your Own

It's easy to calculate a monthly payment on your own if you follow these easy steps:

  1. Write down your interest rate (I), amount of loan (A) and the number of monthly payments (M).
  2. Convert your interest rate to a decimal. If your interest rate were 8%, the decimal would be .08. If your interest rate were 8.5%, your decimal would be .085 and so forth.
  3. Next, take your interest rate decimal and divide it by twelve months. For 8% you would divide .08 by 12. You will get a factor of .0067 by rounding up.
  4. Take the .0067 factor and multiply it by the amount of your loan or purchase price of the vehicle. For instance if you are financing $15,000, you would take .0067 times $15,000 which would equal 99.99. This factor of 99.99 will be used to calculate a monthly payment.
  5. Now take your interest rate again, which in our example is .08 and divide it by 12 and then add a one to get a factor of 1.0067. Next raise the value to the negative power through this calculation: (1 + .08 / 12) ^-60). Finally, take 1 and subtract it from your previous value to use as the denominator. The results in this calculation would equal .329. Learn more about raising values and numbers to the negative power with EasySurf.
  6. Your final step is to take your two values 99.99 and .329 and divide: 99.99 divided by .329 equals $303.92. The $303.92 would be your monthly car payment including both the interest and the principal.

Tips to Calculating Monthly Payments

  • Play around with your calculator or spreadsheet program like Microsoft Excel with different interest rates, loan term in months, and amount of loan to find out what monthly payments you can afford.
  • Remember, if using a calculator, that the numbers shown in this example are rounded up.
  • If you're still having problems calculating a monthly car payment, ask your accountant or bank manager to help you.
  • Interest rates vary from day to day, so call your bank first and find out what the current interest rates are and add one to two points to that rate. By adding one or two points, you'll get an interest rate that you will most likely be offered by a bank, dealership or credit union.
  • Use our Car Buying Strategies to help you get the best deal when car shopping.
  • If a dealership's finance department comes up with a different monthly payment than what you are calculating, ask if there are hidden fees in the purchase price.

It's easy to calculate a monthly car payment on your calculator or with a mathematical spreadsheet software program. You can find easy ways to calculate online, but learning how to calculate on your own can be gold if you're stuck at the dealership without access to the Internet.

Calculate a Monthly Car Payment