Car Loan Monthly Payment Calculation
How can you calculate the monthly payment for a car loan with an APR of 6.27 percent, compounded monthly for 7 years with the first month?
Given the car price is $31,000, what is the formula to determine the monthly payment amount?
Calculating Monthly Payment for Car Loan:
The formula to calculate the monthly payment for a car loan is M = P * (r * (1 + r)^n) / ((1 + r)^n - 1), where M is the monthly payment, P is the principal loan amount, r is the monthly interest rate, and n is the total number of monthly payments.
Explanation:
When you are looking to buy a car and need a loan, it's crucial to calculate the monthly payment amount accurately. In this case, with a car price of $31,000, an APR of 6.27 percent compounded monthly for 7 years, you can use the formula mentioned above to determine your monthly payment.
To calculate the monthly payment, plug in the values into the formula: M = $31,000 * (0.0627/12 * (1 + 0.0627/12)^(7*12)) / ((1 + 0.0627/12)^(7*12) - 1)
By solving the equation, you will find that the monthly payment for this car loan will be approximately $494.42.