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# Auto Loan Calculator

Updated on April 17, 2024
Article byHarsh Katara
Edited byHarsh Katara
Reviewed byDheeraj Vaidya, CFA, FRM

## Auto Loan Payment Calculator

An Auto Loan calculator helps you understand the periodic cash flow outflows in the form of equal installments for your Auto Loans.

#### Auto Loan

[L x r x (1+r)n] / [(1+r)n-1]

Wherein,
• L is the loan amount
• r is the rate of interest per annum
• n is the number of period or frequency wherein loan amount is to be paid
\$
%

The formula for calculating Auto Loan payment is as per below:

[L x r x (1+r)n] / [(1+r)n-1]

Wherein,

• L is the loan amount
• r is the rate of interest per annum
• n is the number of periods or frequency wherein the loan amount is to be paid

Purchasing a new car or any two-wheeler vehicle nowadays is mostly financed through the bank as, with time, the prices have been rising, and for most people, it becomes over budget if they spend the entire amount in one go. Therefore, it becomes necessary for the borrower to know what amount of periodical installment he would be paying on the same and what extra amount he would be paying in the form of interest, and whether it’s viable for him to pay that much extra. Also, the borrowers can compare the installment amount across terms and money lenders, and whichever suits them best, they will opt for the same.

In the case of an auto loan payment, most of the loans are financed up to 80% or a maximum of up to 90%; there are very few cases where the vehicle purchase is financed fully. In some cases, the bank charges processing fees upfront, or any dealer charges, any rebate available, etc. All these need to be taken into account before calculating the installment amount.

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### How to Calculate using the Auto Loan Payment Calculator?

One needs to follow the below steps to calculate the monthly installment amounts of auto loans.

1. First of all, determine the loan amount required. Banks usually provide more loan amounts to those with a good credit score and fewer to those with a lower credit score.

First, we shall enter the principal amount:

2. Multiply the loan amount by a rate of interest.

3. Now, we need to compound the same by rate until the loan period.

4. We now need to discount the above result obtained in step 3 by the following:

5. After entering the above formula in excel, we shall obtain periodically for Auto Loan installments.

### Auto Loan Calculator

You can download this Auto Loan Calculator Excel Template here – Auto Loan Calculator Excel Template

#### Example #1

Mr. Sachin, who stays in New York, is looking to purchase a luxury car costing around \$62,500 ex-showroom. On inquiry with the dealer, Mr. Sachin came to know that he is supposed to pay Insurance on the same, which costs around 4% of the cost price, then he needs to pay road tax, which is around 2% of the cost price. Since the cost, including all the charges, exceeds his budget, he decides to get the vehicle financed by a renowned bank. The bank will finance it 85% as his credit score was excellent, and the rest of the amount he has to pay in cash or cheque. He opts for 24 months of equal installment. The interest rate would be 8%, and the bank shall also charge him upfront 1% processing fees.

Based on the above information, you must calculate the monthly installment amount and what extra amount he would be paying had he not opted for the loan.

Solution:

We need to calculate the cost price of the vehicle first.

• Now, we shall calculate the loan amount, which is 66,250 *85%, which is 56,312.50.
• There are Processing charges, which are 1% of the loan amount, which has to be paid upfront, that is \$563.13.
• Further, the down payment will be 66,250 – 56,312.50, which is \$9,937.50
• The period it is required to be paid is 24 equally installments, and lastly, the rate of interest is 8.00% fixed, which shall be calculated monthly, which is 8.00%/12, which is 0.67%.
• Now we shall use the below formula to calculate the EMI amount.
EMI = [L x r x (1+r)n] / [(1+r)n-1]

= [56,312.50 x 0.67% x (1 + 0.67%)^24 ] / [ (1 + 0.67%)^24 – 1 ]

= 2,546.86

• Therefore, the EMI amount for Mr. Sachin for two years on the loan amount of 66,250 shall be 2,546.86, and when multiplied same with 24, the total amount paid will be 61,124.68 less 56,312.50 that, is equal to 4,812.18
• And total outgo due to the loan will be 4,812.18 + 563.13, which is  5,375.31

#### Example #2

Mrs. Shivani is looking to buy a new two-wheeler by financing it through the bank. The total price of the vehicle is \$15,900, including all charges. The Bank will finance 75%, and the rest shall be paid upfront. However, she is confused with the tenure as she wants to keep her monthly installment lower and doesn’t want to pay interest on the loan period by more than \$1,500. The rate of interest the bank is charging her is 9.5%. The Bank has offered her either to take installments for 24 months or 36 months. You must advise which installment term she should choose that will fit her requirements.

Solution:

We need to calculate the EMI amount for that first, and we shall calculate the loan amount, which is 15,900*70% which is \$11,925.00. The interest rate is 9.5% fixed, which shall be calculated monthly, which is 9.5%/12, which is 0.79%.

• Now we shall use the below formula to calculate the EMI amount for 2 years, which is 24 months.
EMI= [L*r*(1+r)n]/[(1+r)n-1]

= [15,900*0.79%*(1+0.79%)^24 ]/[(1+0.79%)^24–1]

= \$547.53

• Total interest outgo equals to (\$547.53*24)-\$11,925 which is \$1,215.73
• Now we shall use the below formula to calculate the EMI amount for 3 years which is 36 months.
EMI = [L*r*(1+r)n]/[(1+r)n-1]

= [15,900*0.79%*(1+0.79%)^36]/[(1+0.79%)^36-1]

= \$381.99

• Total interest outgo equals to (\$381.99*36)-\$11,925 which is \$1,826.75
• Her preference was to keep a lower EMI, which is matched with a 3-year option, but the second requirement is interest outgo should not be more than \$1,500, which is not met, and hence she would opt for 24 months tenure.

### Conclusion

Auto Loan Payment Calculator nowadays is quite common these days since it makes it comfortable for the borrower to pay for the vehicle without any large outgo. The higher the credit score, the higher the loan amount and the lesser the down payment the borrower would be required to make.

### Recommended Articles

This has been a guide to an Auto Loan Payment Calculator. Here we provide the calculator used to calculate the monthly installment or EMI amount, with examples. You may also take a look at the following useful articles –