How is a car payment calculated?

Here is the formula for a monthly car payment. It takes the principal (P), yearly interest rate (r), and length of the loan in months (m).

\rm Payment = P \times { \frac{r}{12} * (1 + \frac{r}{12}) ^ m \over (1 + \frac{r}{12}) ^ m - 1}

How much should my car payment be?

The amount someone should pay for a monthly car payment depends on various factors such as their financial situation, budget, and personal preferences. It is generally recommended that individuals should not spend more than 10-15% of their monthly income on car payments. This percentage ensures that the car payment remains affordable and allows for other essential expenses and savings. Additionally, it is crucial to consider the overall cost of the vehicle, including insurance, maintenance, and fuel expenses, when determining the appropriate monthly payment. Ultimately, individuals should carefully assess their financial capabilities and prioritize a car payment that fits comfortably within their budget to maintain a healthy and sustainable financial lifestyle.