Use an Auto Loan Calculator to Eliminate Surprises
Working out how much your monthly car payment will be is more complicated than dividing the amount of the loan by the number of months in the loan term. Interest, fees, and taxes add a hefty chunk to the total amount. When you work out your budget for buying a car, do the initial math with an auto loan calculator so you know exactly how much you can really afford to pay for a car before you start car shopping.
Auto loan calculators usually ask for data like the amount of the loan, the length of the loan, and the interest rate you plan to pay. Some calculators will also take into account where you live, whether you plan to make any extra payments on the loan, whether you made a down payment or had cash taken off because of your old car’s trade in value, how much sales tax you will be expected to pay, and even whether you must pay any fees on top of the loan. Some auto loan calculators have a “loan vs. lease” option that will compare the cost of an auto lease to the cost of a loan on the same car.
When using an auto loan calculator, it’s important to use accurate information. Minor mistakes can add up to large variations in the amount of your monthly auto payment. When in doubt, be conservative. For instance, if you do not know exactly how much interest you are likely to pay, estimate your interest a little high. If you do not know how much cash you will be able to get back for your old car, estimate a little low.
Experiment with the loan calculator, entering a longer or shorter loan term, a higher or lower interest rate, more or less of a down payment, and so forth. Get a feel for how small variations affect the bottom line. Understanding how the different parts of an auto loan work together will be a great help when you negotiate with the dealership or the bank for funding.
Also remember that lower is not always better. For instance, if you take out a loan for $15,000 with 10 percent interest and a three year term, you will pay $484 a month, and the total cost of the loan will be $17,424. If you pay off the loan over five years, your monthly payments drop to $319, but the amount you ultimately pay rises to $19,140. An auto loan calculator that calculates the total amount of the loan as well as the monthly payment is a great way to avoid being penny wise and pound foolish.
Getting a car is an important decision. Go into it with the best information you can, and use an auto loan calculator to decide how much you can really spend. It will remove a lot of the stress from getting auto financing. Good luck!