How to Calculate Car Payments Based on a FICO Score

by Duncan Jenkins

Car loans are common debts in the U.S. Most American consumers take out an auto loan if they purchase a new car. If you are considering a new or used car and you need to finance it, it's in your best interest to determine an estimated payment and interest rate. This will help you determine how much you'll be able to pay each month.


Pull a current copy of your credit report and pay for your FICO score at This will give you a free report but not a free score. Excellent scores are above 720. Poor scores are below 600. Keep your FICO score handy.


Research lenders. Let your FICO score guide you. If you have excellent credit, look only at banks and credit unions. You should research finance companies, like CitiFinancial, if you've experienced credit problems.


Contact any prospective lenders and ask for their rate matrix. This is a chart lenders use to determine car loan rates based on consumer FICO scores. This is proprietary information, but you should be able to get an interest rate range based on your FICO. It's best to estimate higher so you have an overestimate on your payment.


Use the following formula to calculate your payment: M = P [ J / 1 - (1 + J) ^ -N). Use the following variables: M = monthly payment; P = principal loan balance; J = interest rate (in decimal form, or interest rate divided by 1200); ^ = exponent; and N = term (in months). Enter the estimated numbers into the equation (you must first know what the purchase price on the vehicle will be).


Calculate the payment. Use this example to follow along: a customer is purchasing a car for $10,000 at six percent on a 72-month term. The equation looks like this: M = 10,000 [ 0.005 / 1 - (1 + 0.005) ^ - 72]. Calculate inside the parenthesis first: 1 + 0.005 = 1.005. Next, the exponent (use an online calculator): 1.005 to the negative 72nd power = .6983. Next, the subtraction: 1 - 0.6983 = 0.3017. Next, the division: 0.005 / 0.3017 = 0.01657. Finally, the multiplication: 10,000 x 0.01657 = 165.73. The monthly payment on this vehicle is $165.73.


Verify your payment using the online auto loan calculator listed in Resources. Remember that this is an estimated payment based on an estimated rate. A real payment and rate can only be calculated after you complete an auto loan application.

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About the Author

Based in Eugene, Ore., Duncan Jenkins has been writing finance-related articles since 2008. His specialties include personal finance advice, mortgage/equity loans and credit management. Jenkins obtained his bachelor's degree in English from Clark University.

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