1. What is the Car Payment Formula?

The car payment formula calculates the monthly payment for an auto loan, accounting for trade-in value that reduces the loan amount. It's based on standard amortization calculations.

2. How Does the Calculator Work?

The calculator uses the following formula:

Where:

• \( loan\_amount \) — Total vehicle price (USD)
• \( trade\_value \) — Value of trade-in vehicle (USD)
• \( r \) — Monthly interest rate (annual rate ÷ 12)
• \( n \) — Loan term in months

Explanation: The trade-in value reduces the principal loan amount, which then affects the monthly payment calculation.

3. Importance of Trade-in Value

Details: A trade-in can significantly lower your monthly payments by reducing the amount you need to finance. The calculator shows exactly how much this reduction affects your payment.

4. Using the Calculator

Tips: Enter the total loan amount (vehicle price minus down payment), your trade-in value (if any), annual interest rate, and loan term in months. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How accurate is this calculator?
A: It provides standard amortization results similar to what lenders use, but actual payments may vary slightly due to fees or rounding.

Q2: Does a higher trade-in always mean lower payments?
A: Yes, increasing your trade-in value directly reduces the amount you need to finance, which lowers monthly payments.

Q3: Should I include taxes and fees in the loan amount?
A: Yes, for accurate results include all costs being financed (sales tax, registration, dealer fees, etc.).

Q4: What's a good interest rate for a car loan?
A: Rates vary by credit score, but as of 2024, average rates range from 3-10% for new cars and 5-15% for used cars.

Q5: How does loan term affect payments?
A: Longer terms mean lower monthly payments but higher total interest paid over the life of the loan.