Posts tagged ‘car loan cost’

Simplified guide in calculating the car loan cost using Excel

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Categories: Calculator

Calculating the car loan cost by using an ordinary calculator can be difficult and time consuming. In addition to this, you might obtain an in accurate result due to unavoidable error. However, you can calculate the cost of a car loan by using Microsoft Excel. The use of Microsoft Excel can make the calculation easier. Besides this, it reduces the risk of mathematical error. In case you would calculate the loan cost using Excel, make sure to use the PMT function and the steps below.

1. When you use Microsoft Excel in calculating, make sure everything properly. Place the interest rate on cell A1 and label it as Interest Rate. The Months of Repayments should be placed on cell B1 and labelled as such. Use cell C1 for the amount borrowed and label it as Loan Amount.

2. Key in “=Interest Rate/12” in cell A2 and replace the Interest Rate with the yearly interest rate. For example, if your car loan has an interest of 5 percent, key in “=0.06/12”.

3. In order to calculate the number of months for repayments, use cell B2 and key in “=Years of Repayment*12”. After doing this, change the Years of Repayment into the number years of the loan. For example, a loan with a five-year term should look like “=5*12”

4. Type the amount borrowed in cell C2. In case you loaned $20,000 type $20,000 loan in cell C2.

5. Key in”=PMT(A2,B2,-C2)” in cell D2 to calculate the monthly payments of your car loan.

As soon as you know how to use Microsoft Excel in calculating the cost of the car loan, you would be able to determine the monthly payments that you would be paying each month. Through this, you can prepare the needed budget so as to avoid delayed payments.

How to conduct a car loan repayment calculation

Calculating the car loan repayment is important before going out to shop for a brand new or used car. By doing this, you would increase the chances of getting the best deal from everything that is offered by dealerships. In addition to this, calculating the repayment amounts of the loan would allow you to determine that payment that you need to pay for each month. You can the principles of amortization and the basic algebraic formula in calculating the repayments. To make the calculation easier, you can use the steps given below.

1. To calculate the repayment for a car loan you can use this formula:

P x (i / 12)) / (1 – (1 + i / 12)-m)

This is consist of (P) which is the principal amount, (i) for the interest rate, and (m) for the number of monthly payments.

2. Start calculating by replacing the letters with the actual amount involved on the loan. For example, you obtained a loan of $15,000 with an 6% annual interest for 36 months , the formula would look like:

($15,000 x (6% / 12)) / (1 – (1 + 6% / 12)-36)

3. Try to calculate the monthly repayment of your loan using a scientific calculator using the formula in Step number 2. The answer would be ($15,000 x (6% / 12)) / (1 – (1 + 6% / 12)-36) = $463.15. This amount is free of taxes and fees, with no down payment.

4. Calculate the total amount that you would be paying on the entire term of financing. This can be accomplished by using the total monthly payment and multiply it with the number of months financed. Using the example on the 3rd Step, the total purchase and loan repayment would be:

$463.15 x 36 = $16.673.40

5. In order to figure out the total interest that you paid for the loan, you need to subtract the amount of principal from the loan

Simple steps in calculating the car loan cost

It is important for you to calculate the car loan cost before you signing the loan contract. This is because knowing the cost of the loan would allow you to determine whether the payments involved would fit your budget or not. In order to do this, you should know the loan