Calculating Affordable Car Loan Installments
An individual wants to buy a new car and needs to calculate the monthly payments for a car loan, considering the car's price, any down payment, the annual interest rate, and the loan duration, to ensure it fits their personal budget and financial capacity.
=-PMT(C2/12, D2, A2-B2) How it works: This formula uses the PMT function to determine the constant monthly payment required to pay off a car loan. It correctly accounts for the actual amount borrowed (car price minus down payment) and converts the annual interest rate to a monthly rate, providing an accurate installment figure over the specified loan term in months, aiding in budget planning.
Data Setup
| Car Price | Down Payment | Annual Interest Rate | Loan Term (Months) |
|---|---|---|---|
| 35000 | 5000 | 0.06 | 60 |
Step-by-Step Guide
Identify the car price (A2), down payment (B2), annual interest rate (C2), and loan term in months (D2) from your data.
Calculate the actual loan principal by subtracting the down payment from the car price (A2-B2).
Divide the annual interest rate by 12 to get the monthly rate (C2/12).
The loan term is already in months (D2), so no conversion is needed for the number of periods (`nper`).
Input these values into the PMT function: `=-PMT(monthly_rate, total_months, loan_principal)`.
The negative sign before PMT ensures the payment is displayed as a positive value.