How to Calculate Auto Loan Payments

Are you planning to buy a car?

You probably aren’t writing a check or paying the full amount in cash. Honestly, it’s a relief to finance a portion of the new or used car purchase. Financing, however, makes it necessary to get the details right. Otherwise, that relief and your comfortable budget might be very short-lived.

First and foremost, you should be going into car loan discussions with an idea of your finances. No one expects you to be a math nerd or anything. There are various auto finance calculators online you can use. Instead, we will help you understand how an auto finance calculator attains specific figures.

The Scenario

Imagine this. You haggle a $19,000 deal on a new car. Your old car can be traded-in, you qualify for a cash rebate, and you have savings for a down payment. Sounds good. Now you want an auto loan to cover the difference.

Taxes. Remember those? You then need to find the amounts for tax state charges, title fees, and state sales tax. These you will then add to the estimated purchase price on your auto finance calculator. It’s important to know if your state allows trade-in sales tax deductions or if you should tax on the final price.

Once you have your loan details, you can obtain a better idea of your complete total. Settling on your monthly payment requires you to multiply by the months. For example, a loan of four years has a repayment period of 48 months. Fret not, online calculators usually specify whether you are to quote the figure as months or years.

Don’t let the computations below scare you. These are just the behind-the-scenes working of your trusted auto finance calculator.

The Calculations

State Taxes and Title Fees

In your case, the state sale tax is 6 percent with tags and title fees costing $150. Your state sales tax would work out to $1140.

Working: {\displaystyle \$19,000*.06=\$1,140}\$19,000*.06=\$1,140.

The of the car currently totals to $20,590.

Working: {\displaystyle (\$19,000+\$1,140+\$150=\$20,290)}(\$19,000+\$1,140+\$150=\$20,290).

Deductible Trade-in Value

If applicable to your state, you should reduce the car price by deducting the trade-in value. Let’s say, the dealership valued your trade-in and offered you $2000. Subtract this value from the current purchasing price to reduce the figure to $18,290.

Working: {\displaystyle (\$20,590-\$2,000=\$18,590)}(\$20,590-\$2,000=\$18,590).


If you qualify for price lowering incentives like rebates, subtract these as well. When buying a car, especially a new one, it is good to research these incentives. Many dealerships and moto vehicle manufacturers give these incentives for various reasons to encourage more sales.

One of the most common incentives for special lease program customers with exceptional credit is a low annual percentage rate. While, repeat buyers are eligible for brand loyalty rebates. For the sake of our scenario, your veteran discount is $2000. After subtracting your car costs $16,290.

Working: {\displaystyle (\$18,590-\$2000=\$16,290)}(\$18,590-\$2000=\$16,290).

Finally, we account for the car dealer’s fees such as vehicle preparation, document, servicing and handling, loan processing, and destination delivery charges. These fees vary across states and depend on the new or used state of the vehicle. Your dealer decides to charge you $750 for service and handling and loan processing. Your subsequent total rises to $17,040.

Working: {\displaystyle (\$16,290+\$750=\$17,040)}(\$16,290+\$750=\$17,040).

Loan Amortization

To find your loan amortization amount. Is to find out much you will be paying down in equal installments every month. Here’s the formula, A=P*(r(1+r)^{n})/((1+r)^{n}-1)}A=P*(r(1+r)^{n})/((1+r)^{n}-1).

A = the monthly payment

P = the principal

r = the interest rate per month, which equals the annual interest rate divided by 12

n = the total number of months

Represent all the information you need to input into the formula.

About the author

Tirupati Gumpula

Hi, I'm a Tech Enthusiastic and founder of Popular technology blogsWay to Hunt. & Elite Tricks. Want to promote your brand? Email: [email protected]

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