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How to calculate car loan payment

in this video I'm gonna show you how to

calculate the interest on your car loan

and figure out the car payment so you

can make sure that you're not overpaying

if there's your first time at our

channel or you haven't subscribed click

on the subscribe button at the bottom my

name is Travis sickles certified

financial planner we stick alone or

financial advisors I bought my car about

two months ago and I just could not

believe the amount of games that were

being played when I went to go and

finance the car the interest payments

and the interest rates just did not line

up luckily I had a tool and a little

knowledge and I want to give you that

tool and I want to share that knowledge

and I'm also going to show you a bonus

tip that'll make it so much easier so

when you walk into the dealership you're

not going to get taken for a ride so the

parts of the loan that you need to be

familiar with the timeframe of the loan

so is it a three or four year or

five-year loan the interest rate that

we're dealing with how much we're paying

on that loan the actual amount you're

financing so it's probably not the whole

car it's probably a portion of the car

so we want to look at that and of course

the payments and getting that thing paid

off as quickly as possible those are the

parts that we're going to talk about and

I'm gonna go through them and I'm also

going to show you this great app you can

download on your phone and bring it to

the dealership with you so you can look

at the math on your terms I'm gonna put

a link in the description at the bottom

to the actual calculator that I used now

if you use a variation of it that's fine

too I don't collect a fee on it there's

no referral it's not a referral link or

anything like that you can go download

it I think it may be cost one or two

dollars maybe a little bit more but it's

a great tool and it'll save you way more

than a couple of dollars so let's jump

into it right now so here is the

financial calculator that I'm going to

walk you through I'm gonna give you this

example and let's say that you have a

car loan that you are gonna pay for over

a five year period we're gonna have an

interest rate of three percent we're

gonna finance twenty thousand dollars

and I want to figure out what those

payments are gonna be I don't want the

car dealership telling me what those

payments are because their math

sometimes gets a little fuzzy and if you

believe me I'm gonna show you why so

let's take a look at this so the first

thing we need to do for this calculator

is we need to take this payment and make

sure that it says 12 so it should say 12

payments per year equals 12 the way you

do that is you hit 1 to shift and then

hit this payment key right up there and

you could see that it brings 12 here and

12 up there and if you did one payment

same thing you can see it says 1 versus

1 so we want 12 payments because we're

paying the loan monthly so we're gonna

start from left and go work our way to

the right so all these buttons up here

is what we're looking at so this looks

more complicated than it is so I'm gonna

walk you through it so let's say we have

a five-year loan so the first thing

we're gonna do is we're gonna hit our 5

and then hit shift and then come up here

and hit n and you can see it says 60

months so it's gonna be 60 months we

want to put in the interest rate so what

we need to do is hit 3 shift and then

the interest and you can see that it

says 3 now the present value PV which is

the amount that we're financing is gonna

be $20,000 so we'll hit 20,000 hit the

PV to see 20,000 up there and we want to

figure out what the payment is so we'll

hit 0 for our future value because at

the end of the 5 years the loan will be

paid off so if we tap on the PMT we

could see that it says 359 point 3 7 so

that's what our payment is it says

negative because it's a payment it's an

outgoing transaction so this will be our

payment so let's say that we get to this

math and we figure out that we cannot

pay three hundred and fifty nine dollars

so what we can take a look at is we can

either extend it past five years or we

could put more down to get a lower

payment so let's put more down to get a

lower payment well if you already know

what we can pay what we could do is say

let's say it's three hundred dollars

that we can pay we're paying it so we're

gonna hit the negative key and we can

put it in write for the payment then if

we click on the present value we can see

that it drops to sixteen thousand six

six what that means is if we financed

this amount at 3% for sixty months then

we'd have a payment of three hundred

dollars of course that requires you to

put more down upfront but this is how

the general math works now let's say

that we went to six years on that same

loan and we'll bring this back up to our

twenty thousand dollars then you can

also see that it drops from our original

amount to three three hundred and four

dollars so if we go back to the five

years we could see it was at three fifty

nine Lord if we extend it out further

it'll bring that payment down but that

doesn't mean our total interest is going

to be less it just means that our

payments are gonna be less and that's

where the real game comes in so you want

to make sure that the total amount that

you're paying is what you're comfortable

with so there's another way that we can

take a look at this now this screenshot

is on my iPad but you can do the same

math right on your iPhone I'm just using

my iPhone to do the screen recording so

I can show you how it works so there's

actually a simpler calculator if we hit

this purple button or this blue button

right here and we hit the worksheet

it'll bring down this little menu and

the first one is the auto loans now this

is a great tool because we can look at

the purchase price and let's say we

bought the car for $30,000 or we're

gonna buy it for 30 you could put in all

the fees or rebates the trade-in values

and and the down payments we're just

gonna stick with the down payment

because we're not gonna have any of the

other fees for this example but let's

say that we put down $10,000 which would

mean that we're financing 20,000 so if

we come over here and we look at the

interest rate we put in our 3% we put in

our five years for the duration of the

loan we could see that the loan amount

was 20,000 our total interest is going

to be one thousand five hundred and

sixty two dollars bringing the total

cost of ownership up to 31 five 62 so if

we spent all this time negotiating what

the price is going to be and we decided

that it was going to be thirty thousand

dollars and the dealership agreed

they're actually making

more money now a side note whether or

not they make the money or the finance

company makes the money it doesn't

matter you're paying thirty one thousand

five hundred and sixty two so don't put

any comments in the bottom saying who's

making the money on the interest I don't

really care all I care about is how much

it's coming out of your pocket that's it

that's all we're gonna take a look at so

that's all that's it that's all we're

gonna take a look at so again if we have

thirty thousand now if you're sitting

there and saying wait a second I still

can't pay this three hundred and

fifty-nine $59 per month you can adjust

those those numbers right here now let's

say that you want to put you know eleven

thousand down and we hit this print

button we could figure out that our

payments going to drop the 341 but let's

say you still needed to come down

further well you can either negotiate

for it on the interest or on the total

price so if they're willing to come down

or if there's some way they can figure

out how to get you a lower interest rate

let's say that's two point five and we

hit print we can see that it comes down

to 337 so you can adjust these numbers

in real time right there at the

dealership so you know that they're not

playing any games now this isn't a video

about negotiating the car it's just

about knowing the math behind it and how

to calculate it and don't be afraid to

break out the financial calculator and

you can bring it to the dealership with

you so when they quote you you can't a

whether or not it's correct and if you

need to figure out how to adjust that

math you can do it for yourself and I

hope this has helped if you've enjoyed

this video be sure to subscribe and

leave your comments down at the bottom

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