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I want to buy a car.

I know the following:
- monthly payment
- interest rate
- # of months of loan
- downpayment %

How can I calculate the total MSRP I can get for my monthly payment?

So for example: I can afford $200 a month
My interest rate is 2.9%
I want a 60 month loan
My downpayment will be %20 of the MSRP

mconlin
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    It is not the MSRP you need to calculate, it is the buying price (presumably including taxes). The formula you are looking for will do that. – Ross Millikan Nov 16 '14 at 21:15

1 Answers1

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The present value of the amortized loan can be found by $$ \text{PV} = \text{PMT}\frac{1-(1+i/12)^{-n}}{i/12} $$ where $i = 0.029$, PMT$=200$, and $n = 60$. The amortized loan is great than $80\%$ cost though since the bank needs to make money on the transaction.

I am not sure how we can tease out the interest over the life of amortized loan. Once we have that, we simply divide by $0.8$ to get the MSRP of the car.

The sad part is I have a degree in Finance as well. I just never use it and didn't keep any of my books. Maybe there is another formula we should use but I cant remember. What formulas do you have at your disposal?

dustin
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