Car loan payment formula
Loan = price − down payment. Monthly rate r = annual rate ÷ 12. Payment = loan × r(1+r)n ÷ ((1+r)n − 1), where n is the number of months. This is principal and interest only. Tax, registration, warranty, and insurance are extra.
A longer term lowers the monthly bill and raises total interest. Compare the “interest over term” line before you stretch to 72 or 84 months.
Worked example
A $32,000 car, $4,000 down, 6.9% for 60 months is a $28,000 loan. Monthly payment is about $553. Total interest over the term is a few thousand dollars on top of $28,000.
Dealer “biweekly” quotes can hide a longer term. Taxes, licensing, and extended warranty are often added to the amount financed; put the full financed amount in the price or loan box.
Common questions
Does this include sales tax?
No. Add tax to the price first if you are rolling tax into the loan.
Why is my dealer quote different?
Dealers may add fees, a different compounding method, or a money-factor lease. This page is a standard amortizing loan.