The Monthly Car Payment Calculation

When purchasing a car, there’s often a down payment and we pay off the rest later through payments. For example, in total the car costs £6,000, Mo puts down a deposit of £900, and Mo wants to pay the remaining amount through 12 equal monthly payments. This is an example of how to show the process of calculating how much Mo will pay per month.

First, highlight the main words: 

“Total amount” is the total amount of the car. 

“Deposit” is the payment you make up front that is deducted from the total. “Remaining balance” is whatever is left after subtracting the deposit amount. 

“Equal monthly payments” means equal payments. 

“Number of payments” indicates how many times you will divide the remaining amount.

Next, lay out the steps in sequence. 

Start with the total amount, which in this case is £6,000. Deduct the deposit, so £6,000 minus £900 leaves a remaining balance of £5,100. 

Now check the number of payments, so Mo is paying this amount over a year, or 12. Divide the remaining amount by 12. That is £5,100 divided by 12 equals £425 per month.

Now we can identify when people get stuck in their steps. For example, they may forget to deduct the deposit (i.e. dividing the total amount of £6,000 by 12). Someone might put in the wrong number of payments (e.g., 10, 24 payments etc.). They can also get confused by basic math errors. 

The best practice is, they can jot down what they intend to calculate first clearly, in the forefront of the reference and double check the subtraction and division along the way.

In conclusion, pay attention to deduct the deposit first, not later, then divide the remaining balance by the proper amount of payments. This will generate an accurate payment schedule and Mo will end up paying £425 for the car.