Purchasing a car is a major expense, regardless of whether you’re buying new or used. Use an auto loan calculator to help you determine potential monthly payments so you can make an informed decision when you start shopping. It’s a smart first step in the purchase process, allowing you to know exactly what you’re getting into.
What can an auto loan calculator be used for?
An auto loan calculator helps you determine what car you can truly afford. It takes into account all of the costs associated with a vehicle loan, including the purchase amount and your down payment. When you discover your monthly payment for a certain price tag, it can help you determine your budget for your new car.
You can also figure out how long you want your car payments to last. Most auto loans last between three and seven years. The longer your repayment term lasts, the lower your monthly payments end up. On the downside, you’ll pay more interest since the loan amortization takes longer.
Start looking at different payment scenarios before you head to an auto dealership. That way, you’ll already know what prices look like in the form of monthly payments and you’ll know your maximum budget. If you’re considering a new car, this information also helps you determine how much money (if any) you can spend on upgrades without suffering sticker shock when you look at the financing paperwork.
How do I calculate payments for auto loans?
In order to calculate potential monthly payments, you’ll need to have a few pieces of information on hand to see how different variables impact how much you’ll pay for the vehicle. You’ll input the loan amount, a number of months in the loan term, and your interest rate.
When thinking about the loan amount, there are a few factors to take into consideration. First, remember to adjust the purchase price based on your down payment and any trade-in value you may receive from another car. If you have a balance on an existing car loan, your trade-in proceeds may need to go towards that, rather than your new loan.
It’s also important to remember that in addition to the purchase price of the vehicle, you may also need to pay for things like your registration fee, title fee, and dealer fees, which can be rolled into the cost of the loan. You’ll need to account for these when playing around with numbers on your auto loan calculator and figuring out how much cash you need to make the numbers work for the car you want. When comparing different loan options, look at the APRs, which factor in all costs associated with the loan, not just the interest rate.
Disclaimer: This is not legal or financial advice. Please consult a legal or financial advisor for your specific situation.