How to Mathematically Calculate a Car Loan's Amortization Schedule

How to Mathematically Calculate a Car Loan's Amortization Schedule
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A typical car loan has a term of 48 to 60 monthly payments. The amortization of a level payment loan, like an auto loan, will have higher interest charges associated with the early payments and in the later payments more of the payment is principal to pay down the loan. A car loan will amortize at a set pace with each monthly payment. The math can be handled with a calculator and piece of paper.

Divide the annual interest rate for the car loan by 12 to obtain a monthly interest rate. For example, if the annual rate is 9 percent, dividing by 12 gives a monthly rate of 0.75 percent.

Multiply the monthly interest rate times the original loan amount to calculate the interest portion of the first monthly payment. For the example, the car loan was for $20,000. Multiply $20,000 time 0.75 percent for an interest amount of $150.

Subtract the interest for the first monthly payment from the payment amount to get the principal amount of the first payment. The example loan has a payment of $415.17, so the principal amount is $265.17.

Subtract the principal amount for the payment from the loan balance. After the first payment, the loan balance on the example loan would be $20,000 minus $265.17 equals $19,734.83.

Write the first line of the amortization table, making columns for interest, principal and loan balance. Use the calculated figures under each column.

Calculate the interest, then principal for the second payment using the new loan balance to calculate the interest for the payment. Repeat this step for each payment of the car loan.


  • A spreadsheet in a program like Microsoft Excel or OpenOffice Calc can be set up to do the calculations and automatically fill in the columns.