Car payment formula explained (with examples)

TL;DR: Monthly Payment = (L × r) / (1 − (1 + r)-n), where r is APR/12 and n is number of months.

What inputs matter?

• Loan amount (L): vehicle price − down payment
• APR: annual percentage rate (not monthly)
• Term: number of monthly payments
• Extra payment: optional, reduces interest and term

Worked example

Price 30,000, down 3,000, APR 6.9%, term 60 months → loan 27,000. r = 0.069/12 ≈ 0.00575. Payment ≈ 533.33.

Try it in our Car Payment Calculator.

Tips

• Small APR drops can save thousands over long terms.
• Adding even 50 extra per month can shave months off.