This calculator will compute the monthly payment of an automobile loan.
Car Payments are Not Complex
Buying a new car can be a major investment, often second only to buying a house. Few people can afford to buy a new vehicle on a whim, and ideally, when someone is shopping for a new car they expect it to provide reliable transportation for years to come. For most people, buying a new car will require an auto loan, and that means committing to a schedule of monthly payments over an extended period of time. But balancing the cost of a new car against projected income can be difficult, and it is important to know what you can afford to pay every month for the next three to five years. Calculating your monthly car payments before signing a loan agreement can help you to prepare for the financial road ahead, and avoid much of the financial stress that can accompany a major investment like a new automobile.
The Down Payment
The first thing to consider when shopping for a new car, is to decide how much money you can devote to the down payment. The larger the initial down payment, the more manageable your auto loan will be. A substantial down payment will give you more flexibility in determining the life of your auto loan, and the size of your monthly payments. Many auto dealers offer financing with no down payments as an incentive to get customers in the door. However, it is important to remember that “zero down” means you will be paying more in the long run in interest fees. It will also mean larger monthly payments, and an extension to the overall life of the loan.
Trade In Value
Trading in your old car can go some way to reducing the total cost of your new vehicle purchase. Think of it as a second down payment. However, cars greatly depreciate in value, particularly over the first three years of ownership. It is also important to consider the condition of the trade in. Keep in mind that while the blue book value of your trade in may be significant, it may not match the credit you actually receive from the dealer.
Interest rates on auto loans are largely determined by the applicant's credit score, and the life of the loan itself. Currently, interest rates on car loans range from 3.5% to 4.8%, depending on the buyer's credit history and lender's discretion.
The life of your auto loan may have the biggest impact on the size of your monthly payments. The longer the life of the loan the smaller the payments. However, it is important to remember that while an extended loan can provide smaller monthly payments, it will result in an increase in the total interest due and a significant increase in the total cost of the loan.
Calculating Your Loan Information
Using the above calculator you will be able to determine the likely monthly payments associated with your automobile loan. Enter the total cost of the vehicle, including all seller's fees, in the required field. Next, enter your down payment and trade in allowance, as well as the interest rate attached to the loan being offered. Finally, the life of the loan in months. This will be the greatest variable, and will have the biggest impact on the amount of your monthly payments. Remember, the longer the life of the loan the smaller the monthly payment but the greater the cost of the loan in total.