I just took a car loan. The amount financed is $12,865.57, the APR is 3.06%, and the length is 48 months.
The finance company charges $285.47 monthly. I would like to know how they calculated such monthly payment?
Personal Finance & Money Stack Exchange is a question and answer site for people who want to be financially literate. It only takes a minute to sign up.Sign up to join this community
I would like to know how they calculated such monthly payment
Your values would come out to be:
r = (1+3.06/(100*365))^31-1=0.002602 (converting your annual percentage to a monthly rate equivalent of daily compounded interest)
PV = 12865.57
n = 48
Inserting your values into the formula:
P = [r*(PV)]/[1-(1+r)^(-n)]
P = [0.002602*(12865.57)]/[1-(1.002602)^(-48)]
P = 285.47