How Do You Calculate Auto Loan Payments?
• Deduct the trade-in value, if applicable, from the price of the car you wish to buy to get the estimated purchase price. • Calculate the amount of state sales tax and add it to the estimated purchase price. For example, a state with a 7 percent sales tax will add $1,050 on top of a purchase price of $15,000 to make it $16,050. • Some states don’t allow a deduction of sales tax on trade-ins; you must pay tax on the total cost. • Add any fees that the dealer charges, such as preparing the vehicle for sale, a destination fee or handling the loan. Subtract the amount you wish to pay as a down payment to get the amount you want to finance. • Determine the monthly payment with the =PMT function in MS Excel. This example uses a $15,090 loan for 48 months at 7 percent interest. • Open MS Excel and type these descriptions on the first 4 lines in column A: “Rate,” “Number of Payments,” “Present Value” and “Future Value.” • Enter the following numbers in column B next to the descriptions: 7.00%
