Question 1

How is a monthly auto car payment calculated?

Accepted Answer

A monthly auto loan payment uses the standard fixed-rate amortization formula: Payment = P * [r(1 + r)^n] / [(1 + r)^n - 1], where P is the total financed balance, r is the periodic monthly interest rate (APR / 12), and n is the total number of months.

Question 2

How does an extra monthly payment save money on a car loan?

Accepted Answer

Every dollar paid beyond your monthly payment directly reduces your principal balance. A smaller principal lowers the monthly compound interest calculated in each subsequent billing period, accelerating payoff and saving interest.

Question 3

How does vehicle trade-in affect sales tax?

Accepted Answer

In most US states, trade-in credit reduces the taxable purchase price. For example, buying a $30,000 car with a $5,000 trade-in means sales tax is only levied on the $25,000 difference.

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