When you buy a new car, you may opt to take out a loan to finance part of the cost. Bankrate.com recommends not spending more than 20 percent of your budget on your monthly car payments. To know whether the car loan will fit in your budget, you will need to know the monthly payments. The monthly payments depend on how much you borrow, the interest rate and the term of the car loan.

1. • 1

     Divide the yearly interest rate of the loan by 12 to find the monthly interest rate. For example, if the annual interest rate equals 8.16 percent, you would divide 0.0816 by 12 to get 0.0068 as the monthly interest rate.

   • 2

     Multiply the monthly interest rate by the amount borrowed. In this example, if you borrowed $12,600, you would multiply $12,600 by 0.0068 to get $85.68.

   • 3

     Add 1 to the monthly interest rate. In this example, you would add 1 to 0.0068 to get 1.0068.

   • 4

     Raise the result from the previous step to the negative Mth power, with M being equal to the number of monthly payments made on the loan. Continuing this example, if you had a 48-month car loan, you would raise 1.0068 to the negative 48th power to get 0.722314062.

   • 5

     Subtract the result of step 4 from 1. In this example, you would subtract 0.722314062 from 1 to get 0.277685938.

   • 6

     Divide the result from step 2 by the result from step 5 to get the monthly payment. Finishing the example, you would divide $85.68 by 0.277685938 to get a monthly payment of $308.55 which is principal plus interest.