Car loan amortization formulas can be somewhat difficult to comprehend, particularly for those without experience dealing with loans previously. Essentially, a car loan amortization formula is used to calculate the amount of money that you'll need to completely pay off the loan; this is what is referred to by the term "amortization." While many websites and lenders provide a car loan amortization chart to help determine the repayment rate, you can also use car loan amortization Excel documents or simple formulas to determine it on your own.
Formula for the Payment Amount Per Period
This is likely the single most important amortization formula that you'll need to know. It helps you to determine how much money you'll owe to the lender in any given repayment period.
Where P = the principle, r = the interest rate, and n = the number of payment periods, the payment amount per period is given by this formula:
P x r(1 + r)^n/(1 + r)^n - 1
Formula for the Rate per Period
A second formula you may find useful is the one to calculate the interest rate on a loan per payment period. That is available here.
Where p = the number of periods per year, n = the number of compounding periods per year, a = the nominal annual interest rate, and R = the rate per period:
R = (1 + a/n)^n/p - 1
