Overhaulin'

How is the interest calculated in a car loan?

I am trying to figure out what formula is used when calculating interest rate for a car loan. I have been using I=PRT but it doesn't come out to what the car loan calculator shows. my Principle is $23,996.16, Interest is 2.9% and Time is 60 months or 5 Years. The Car loan calculator returns $430.11 as monthly payment. But when I apply the formula and do it manually, I get $539.713/month. This is how I do it. I = {{$23,996.16 x (2.9/100)} x (12/60)} = $139.777/month on interest. $23996.16 / 60month = $399.96 $139.77 + $399.96 = $539.713. What am I doing wrong? Please help. Sincerely, Peter T

Public Comments

1. Your formula is wrong since you do not account for the decreasing principle each month. 2.9% APR interest rate is on the monthly balance.