# Calculate a Monthly 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

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.

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.