An Auto Loan Calculator

How to Use This Calculator

Using an auto loan calculator is simple. Follow these steps:

1. Enter the loan amount (the total amount you want to borrow).
2. Input the annual interest rate (the percentage charged by the lender).
3. Specify the loan term (the length of the loan in years).
4. Click the Calculate button to see your results.

The calculator will display your monthly payment, total interest paid, and the total cost of the loan. You can adjust the inputs to see how changes affect your loan terms.

Formula Explained

The auto loan calculator uses the standard loan payment formula:

This formula calculates the fixed monthly payment required to pay off the loan over the specified term. The total interest paid is the total amount paid minus the original loan amount.

Worked Example

Let's say you want to borrow $25,000 at an annual interest rate of 5% for 5 years. Here's how the calculation works:

1. Convert the annual interest rate to a monthly rate: 5% ÷ 12 = 0.4167% or 0.004167 in decimal.
2. Calculate the number of payments: 5 years × 12 = 60 months.
3. Plug the values into the formula:

   Monthly Payment = $25,000 × (0.004167(1 + 0.004167)^60) / ((1 + 0.004167)^60 - 1)

   = $25,000 × (0.004167 × 1.004167^60) / (1.004167^60 - 1)

   = $25,000 × (0.004167 × 1.2894) / (1.2894 - 1)

   = $25,000 × 0.0533 / 0.2894

   = $25,000 × 0.1842

   = $4,605.00

4. Total amount paid over 5 years: $4,605 × 60 = $276,300.
5. Total interest paid: $276,300 - $25,000 = $251,300.

This example shows that borrowing $25,000 at 5% for 5 years would result in monthly payments of $4,605 and total interest of $251,300.