Car financing for less
2-Year term
UP TO $40,000
6% compounded annually with a $500 up-front payment
To calculate the monthly payment on a car financing loan with a 2-year term, up to $40,000, 6% interest rate compounded annually, and a $500 up-front payment, you can use the formula for calculating loan payments:
P = (r * PV) / (1 - (1 + r)^(-n))
Where:
P = Monthly payment
PV = Present value (loan amount)
r = Monthly interest rate
n = Number of total payments
First, convert the annual interest rate to a monthly rate:
Monthly interest rate = 6% / 12 months = 0.5% or 0.005
The number of total payments for a 2-year term would be 2 years * 12 months = 24 months.
Now, substitute the values into the formula:
P = (0.005 * (40000 - 500)) / (1 - (1 + 0.005)^(-24))
Calculate the numerator:
(0.005 * (40000 - 500)) = $197.5
Calculate the denominator:
(1 + 0.005)^(-24) = 0.8734
Substitute the values into the formula:
P = $197.5 / (1 - 0.8734) = $197.5 / 0.1266 = $1559.67 (approximately)
Therefore, the estimated monthly payment for this car financing would be around $1559.67.