Yearly Car Payment = (Car Price - Down Payment) × (Interest Rate / 12) × Loan Term
Let's use an example to illustrate the calculation:
Assume you purchase a car for $25,000 with a $5,000 down payment, an interest rate of 4.5%, and a loan term of 5 years (60 months).
Yearly Car Payment = ($25,000 - $5,000) × (4.5% / 12) × 5
Yearly Car Payment = $20,000 × (0.045/12) × 5
Yearly Car Payment = $20,000 × 0.00375 × 5
Yearly Car Payment = $375 × 5
Yearly Car Payment = $1,875
In this example, the yearly cost of the car payment would be $1,875.
Remember that this calculation does not include additional costs associated with car ownership, such as insurance, maintenance, fuel, parking, and taxes. You should factor in these expenses when considering the total cost of owning a car.
Before purchasing a car, it's advisable to research and compare different car models, prices, interest rates, and loan terms from multiple lenders or dealerships to find the best deal that fits your budget and financial situation. Using a car payment calculator or consulting with a financial advisor can also help you make an informed decision.
