This calculator will compute the monthly payment of an automobile loan. Some dealerships offer rebates while credit unions may offer low APR interest incentives, depending on the credit score of the borrower.
Managing Car Loan Details
Next to real estate, vehicles are some of the most expensive items consumers purchase during their lifetimes. Since new vehicles cost tens of thousands of dollars these days, out of pocket purchases are not always commonplace. To get their hands on the vehicles they desire, consumers need to reach deeper, into the pockets of banks and credit unions willing to finance their purchases.
Cars and trucks are purchased using installment credit based on the total purchase price of each vehicle. Because they are big-ticket purchases, vehicles are financed at relatively low rates.
To construct payment schedules, lenders consider a number of factors about your loan. The best way to absorb the personal debt responsibilities associated with vehicle purchases is to isolate the essential features of your car loan.
Principal Amount – The total purchase price of your vehicle provides the initial basis for the money borrowed to finance it. Additional charges and fees are sometimes rolled in, but the number generally represents what you paid for the car. This figure forms the core of your debt, which is amortized, or spread-out, across the repayment period required to satisfy the loan.
Down payment – Car purchases are not necessarily exclusively made with borrowed funds. More often, car buyers save some money to apply toward a vehicle down payment. Sellers require various levels of up-front money, based on the price of each vehicle and the financing policies they adhere to. In any case, the down payment amount gets shaved right off the top of a vehicle's price, keeping it out of your principal balance.
Trade-in Allowance – One of the unusual characteristics associated with buying cars and securing the proper amount of financing is a unique credit dealers make available. Trade-in policies allow buyers to contribute their own current vehicles toward the purchase of new ones. Trade-in allowance is the figure buyers and sellers agree on, representing the value of the vehicle being thrown in to the deal. Like down payments, trade-ins are taken off the top of new vehicle prices, so the balance never makes it to the principal borrowed – lowering overall debt for car buyers.
Interest Rate – The interest rate governing repayment determines exactly how much interest is added to each month's car payment. Combined with principal amount, this represents your total payment each billing period. Automobile rates are generally fixed, meaning the interest charged does not change percentages over time. In addition, special manufacturer and dealer incentives furnish low-interest financing for vehicle purchases. Recent economic conditions led to extremely favorable car-buying conditions, prompting many consumers to buy cars. 0% interest loans led the way, representing all of the major car makers. Under normal circumstances, auto loan rates remain low, but are subject to market conditions and competitive pricing environments.
Number of Payments – The final variable required for accurate analysis of an automobile loan is the number of monthly payments required to reach the loan satisfaction date. Auto loan calculator uses these inputs to illustrate your monthly automobile payment. The principal amount is first reduced by down payment and trade-in contributions, then interest rate and duration of payment are considered, to complete each calculation.