How is a Monthly Car Payment Calculated?

The first step to knowing how a monthly car payment is calculated is know what an auto loan is. An auto loan is known as an amortizing loan, this means that a creditor lends you the principal (cost of the car) and you pay the creditor back plus interest through equal payments over the loans life time. In short, an auto loan is paid back through monthly payments that remain the same as interest and principal decrease.

The amortization calculation

Your monthly car payment is determined through the amortization calculation. The information that you need for this calculation is the amount of the loan, the interest rate per month, and the total number of months that you will be paying. The amortization formula uses these figures to determine what your monthly car payment will be throughout the life time of the loan. You can quickly find out your estimated monthly payment using our auto loan calculator after you find the perfect vehicle in our used inventory at our Georgetown, KY used car dealership new Frankfort. If you have questions about a car loan you can always come by our dealership where we help customers from Lexington, KY, Winchester, KY, and Nicholasville.


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