Loans and mortgages Updated November 2026

Car loan payment

A car loan payment uses the standard amortizing loan formula: PMT = P x r / (1 - (1 + r)^-n), with r the annual rate divided by 12 and n the term in months. Total interest is PMT x n minus P. A longer term lowers the payment but raises the total interest paid.

Syntax

PMT = P x r / (1 - (1 + r)^-n)   total interest = PMT x n - P

Part	What it is
`P`	Amount financed (price minus down payment and trade-in, plus fees rolled in)
`r`	Monthly rate (APR / 12)
`n`	Term in months

Examples

P = 20,000, 7% APR, 60 months
PMT = 20,000 x (0.07/12) / (1 - (1 + 0.07/12)^-60)

Result: PMT = 396.02; total interest = 396.02 x 60 - 20,000 = 3,761.44

Excel: =PMT(7%/12, 60, -20000)

P = 15,000, 5% APR, 48 months
PMT = 15,000 x (0.05/12) / (1 - (1 + 0.05/12)^-48)

Result: PMT = 345.44; total interest = 1,581.09

P = 25,000, 9% APR, 72 months
PMT = 25,000 x 0.0075 / (1 - 1.0075^-72)

Result: PMT = 450.64; total interest = 7,446.01

Common mistakes

Financing the sticker price instead of the amount after the down payment and trade-in; the payment is based on the amount actually borrowed.
Comparing loans by monthly payment alone: a 72-month loan has a lower payment than a 48-month loan but costs far more in interest.
Using the APR as the monthly rate; divide by 12.

Practice Car loan payment

These drills check your answer on live data, free, no account needed.

Car loan paymentA car costs $18,000. You pay $1,000 down and finance the rest over 60 months at 10% APR. What is the monthly payment?
How much you can borrowYour budget allows a monthly mortgage payment of $800. At 4.25% APR for 30 years, what is the largest loan you can take?
Total interest over the loanYou borrow $105,000 for 30 years at 4.25% APR with monthly payments. Using the payment rounded to the cent, how much interest do you pay over the life of the loan?

Questions

How much car can I afford at 400 a month?

Use the present value of an annuity: at 7% over 60 months, 400 x (1 - (1 + 0.07/12)^-60) / (0.07/12) = 20,200.80 of financing. In Excel: =PV(7%/12, 60, -400).

Does paying extra on a car loan save interest?

Yes, on a simple-interest loan (most car loans) extra principal reduces the balance and the interest charged from then on, and shortens the term. Check for prepayment penalties first.

Mortgage payment formulaHow to calculate a monthly mortgage payment with M = P x r / (1 - (1 + r)^-n). Examples for 200,000 at 6% and 300,000 at 5%, Excel PMT and common mistakes.
Total interest paid on a loanTotal interest on an amortizing loan is the payment times the number of payments minus the principal. Examples for 30-year and 15-year loans, Excel CUMIPMT.
How much can I borrowThe loan you can afford for a given payment is the present value of an annuity: P = PMT x (1 - (1 + r)^-n) / r. Mortgage and car loan examples and Excel PV.
Extra payments and payoff timePaying extra each month shortens the loan: n = -ln(1 - P x r / PMT) / ln(1 + r) with the higher payment. Example: 200 extra on 200,000 saves 9 years, 79,800.