Calculate Auto Loan Monthly Payment
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Reviewed by Calculator Editorial Team
Calculating your auto loan monthly payment is essential for budgeting and financial planning. This calculator helps you determine your monthly payment based on the loan amount, interest rate, and loan term.
How to Calculate Auto Loan Monthly Payment
To calculate your auto loan monthly payment, you need three key pieces of information:
- Loan amount - The total amount you're borrowing
- Interest rate - The annual percentage rate (APR) charged by the lender
- Loan term - The length of the loan in years or months
The calculation uses the standard amortization formula to determine the fixed monthly payment that will pay off the loan over the specified term.
Important Notes
This calculator assumes a fixed interest rate and regular monthly payments. It does not account for prepayment penalties, tax deductions, or changes in interest rates over time.
Formula Used
The monthly payment for an auto loan is calculated using the following formula:
Monthly Payment Formula
M = P [ i(1 + i)n ] / [ (1 + i)n - 1 ]
Where:
- M = Monthly payment
- P = Principal loan amount
- i = Monthly interest rate (annual rate divided by 12)
- n = Number of payments (loan term in months)
This formula calculates the fixed monthly payment that will pay off the loan over the specified term, including both principal and interest.
Worked Example
Let's calculate the monthly payment for a $25,000 auto loan with a 4.5% annual interest rate over 5 years (60 months).
| Input | Value |
|---|---|
| Loan Amount (P) | $25,000 |
| Annual Interest Rate | 4.5% |
| Loan Term | 60 months |
Using the formula:
- Convert annual interest rate to monthly: 4.5% ÷ 12 = 0.375% or 0.00375
- Calculate the monthly payment: M = 25000 [ 0.00375(1 + 0.00375)60 ] / [ (1 + 0.00375)60 - 1 ]
- The calculation results in approximately $452.47 per month
This means you would pay about $452.47 each month to pay off the $25,000 loan over 5 years.
Frequently Asked Questions
What is the difference between APR and interest rate?
The annual percentage rate (APR) is the total cost of credit, including any fees, while the interest rate is the cost of borrowing without fees. APR is always higher than the interest rate.
How does a longer loan term affect my monthly payment?
A longer loan term means lower monthly payments but more interest paid over time. A shorter term means higher monthly payments but less interest paid in total.
Can I pay extra toward my loan without penalty?
Most auto loans allow prepayments without penalty. Paying extra can save you money on interest and shorten your loan term.