How much is my car loan?

I was preapproved for a 72-month $28,000 car loan with a 6.3% interest rate, but after reviewing my budget, I’m not confident I can afford the monthly payments. How much is my car loan payment if I use the total amount offered?

Answer
You can be approved for more than you can afford on a car loan, so I’m relieved to hear you’re taking the time to understand your budget fully.
If you use the entire $28,000, your monthly car loan payment will be $468.02. If this is more than you can comfortably pay, you can calculate how much you can afford using an online loan calculator or by hand using this formula: A = P x r(1+r)n(1+r)n -1
Where:
  • A is the monthly payment
  • P is the principal
  • r is the monthly interest rate in decimal form
  • n is the number of payments or months in the term
If you know the monthly payment you want, you can determine how much you should borrow by solving for P. For example if you want a monthly payment of $400:
  • Divide your interest rate as a decimal by 12 to get the monthly interest rate of .00525.
  • Substitute your values into the equation, leaving P as the variable and setting A equal to 400.
  • Solve the fraction of .005252 x (1.00525)^72 divided by (1.00525^72)-1 to get a rounded value of .01672.
  • Now, the equation should read $400=.01672 x P
  • Divide $400 by .01672 to get $23,923.44, which is the amount you can borrow having a $400 monthly payment.
Hopefully, this formula is helpful and makes setting a budget more manageable, don’t forget to include car insurance and any additional fees!
To easily compare quotes and purchase a new policy, download Jerry, an insurance comparison app that can generate quotes from over 50 top companies and takes care of all the paperwork and phone calls for you once you make a selection.
Jack Walsh
Answered on Dec 15, 2021
Jack is an insurance specialist and writer living in Buffalo, New York. He has a BA from Union College and worked as an insurance agent with Jerry before joining our content team. He enjoys using data and research to break down complex subjects and convey a story. In his spare time, Jack enjoys cycling, cooking, and exploring Buffalo’s beautiful waterfront.
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