Vehicle Loan Calculator

Car-buyers are faced with a variety of decisions as they contemplate ownership and arrange to purchase automobiles. In addition to determining the correct makes and models for their driving habits, financing concerns are pressing.

Unless they can be made out of pocket, funding major purchases requires consumers to borrow money, so today's automotive lending market provides a wide variety of options for buyers to consider.  Loan-terms are offered for a range of repayment lengths, from a couple to several years, furnishing flexible financing options for diverse budgetary requirements.  Before moving forward with financing selections, buyers evaluate the costs of purchasing vehicles and keeping them on the road, accounting for myriad operational expenses and repayment alternatives.  Establishing a broad view of operating expenses and overall financing costs helps car-buyers choose between 3, 4, 5, 6, or 7-year financing options extended by car dealerships.

Purchasing a new car can be an expensive proposition, and very few people are fortunate enough to be able to cover the entire cost of a new automobile out of pocket. For most of us, some form of financing will be necessary. Navigating the world of auto loans can be tricky, and there are a few important factors to consider when financing a new car. Initial down payments, interest rates, and the life of the loan itself, all have a direct impact in the final total amount paid for a new vehicle. If you are considering the purchased of a new car, truck, or SUV, there are a few financial points you need to consider first.

Down Payments and Trade In Allowances

A down payment, and/or a vehicle trade in, has a direct impact on the terms of an auto loan. The larger the down payment or trade in allowance, the less you will need to finance. Ideally, an average down payment should be between 10% and 20% of the total cost of the new vehicle. While some car dealers will offer financing with no money down, it is important to remember that this will greatly increase the life of the loan, and will likely lead to a higher interest rate and additional fees.

Interest Rates and Credit Scores

Interest rates are typically determined according to the buyer’s credit score. The stronger your personal credit, the more likely it is that you will qualify for a reduced interest rate. The interest rate on your auto loan is the single most important variable to consider when comparing financing options, and will determine how much you are paying over and above the cost of the vehicle over the life of your loan. Average interest rates on new auto loans range from 3.5% to 4.8% depending on the loan holder’s credit score.

Loan Terms

Finally, the life of the loan must be considered. Standard terms for auto loans include monthly payments over the course of 3 to 5 years. The longer the life of the loan, the lower the monthly payments. However, with an extended loan it will take longer to pay off the principle and more interest will accrue. A short term loan will result in higher monthly payments, but will reduce the total amount of interest due on the loan.

The Real Cost of Driving

At purchase time, short-term financing options often appear best, removing ongoing vehicle expenses from your budget ledger as quickly as possible.  But the costs of driving go beyond the purchase price and interest owed, prompting further evaluation before committing to financing deals.

Mechanical issues add to vehicle costs over time, requiring repairs and maintenance not always easy to predict. While newer cars are more reliable than older ones, even they are not without routine upkeep requirements.  There is no precise balance point available to lean on when evaluating vehicle age and life expectancy.  Where you live, how you drive, and the way your used car was treated before you bought it each have significant impacts on how it will perform for you.  When budgeting though, and choosing between variable length automobile financing options, it is prudent to leave a cushion for unanticipated expenses. If your entire monthly transportation allowance goes toward fixed costs, you'll be hard-pressed to address pop-up repair needs and other maintenance expenses.

Insurance is another variable influencing overall vehicle costs.  Before committing to repayment terms, prudent car-buyers assess insurance costs.  Because high-performance and luxury vehicles are insured at higher rates, the cost of coverage impacts the amount of money available to cover monthly car payments.  Buyers surprised by high insurance rates step-in to longer length vehicle loans, in order to lower their payments.

Additional Expenses

While they might seem less significant than other costs, vehicle licensing and registration fees are nonetheless meaty budget entries to be considered as you contemplate vehicle financing.  Fixed costs like these are easy to evaluate, so there is no excuse for coming-up short on your analysis.  Even sales tax can be anticipated, using the rates applied in your locality.

Extended warranties and aftermarket purchases provide additional food for thought, taking their place beside other transportation costs.  Like gasoline, these expenses are subject to discretion.  To figure out which loan term is best for you, calculate the number of miles you drive each month, before plugging-in your vehicle mileage rating to determine how much gas you'll need.  Then, use prevailing gas prices to translate your figures into actual dollars spent monthly.  Once tabulated, compare your monthly affordability index with various repayment terms explored using the car loan term payment calculator.

Calculate Your Car Loan Payment Details

The above calclulator will help you to determine which car loan is right for you. After deducting your down payment or trade in value, enter the total amount being financed into the appropriate field. This should include the outstanding balance due on the vehicle, plus any commission and attendant fees required by the dealer. Next, enter the variables of the auto loans you are considering, including interest rates and the overall life of the loan. The above tool will show you the projected monthly payment, and the total amount of interest that will accrue over the life of your loan. When choosing a suitable auto loan, a simple rule of thumb is to settle on a monthly payment that does not exceed 20% of your monthly net income.