If you’re in the market for a new car, it’s nice to know your car payment before making a final decision. This helps you determine an affordable price, thus helping you buy a car within your budget. There are ways to estimate the car loan payments before signing a purchase agreement. If you’re feeling brave, you can always do the math yourself with a scientific calculator. Understand, however, that this method is by no means simple. And if you’re not a math whiz, there’s plenty of room for error.
There is a better way, and with the help of an online payment calculator, you can accurately estimate the car loan payment, as long as you provide adequate information.
Here are three things to keep in mind when using a calculator to figure the car loan payment.
1. What is the overall cost of the car?
To estimate your auto loan payment, you need to know the overall cost of the car. It isn’t enough to simply enter the vehicle price when using an online calculator. Unfortunately, other costs are added to the final price of the car, such as sales tax, title, registration fees as well as vehicle add-ons. In addition, you have to factor in the trade-in value of your current car, if applicable, plus your down payment.
There is no shortage of online auto loan calculators. Some calculators are basic, and they’ll estimate your car loan payment based on the sale price only. These calculators can provide a ballpark figure. But if you’re looking to get the most accurate estimate, you need a calculator that will take into consideration other vehicle costs. For information on extra vehicle costs, ask about title, taxes and registration fees when visiting dealerships to compare prices.
2. What interest rate do you qualify for?
It is difficult to estimate a car loan payment if you don’t have interest rate information. An auto loan calculator requires this information, and while you can always guess and provide an average, this method isn’t going to provide an accurate estimate.
For this matter, it helps to contact one or two banks and request a no-obligation auto loan quote. Based on your income and credit rating, a bank can determine the interest rate you’re most likely to qualify for, as well as how much you can spend on a vehicle.
3. What is the length of the loan?
To figure out the payment on car loan, not only do you need the final vehicle cost and interest rate, but also the loan term. You have plenty of leeway with regards to the term, as you can choose to spread your payments over two, three, four or five years. Determine how long you want to pay on your vehicle loan and enter this term in the car loan calculator. And if you don’t know the best term, an auto loan calculator can help you determine the most affordable option. For example, you may wish to pay off your car loan in three years, but not sure if you can afford the higher payment. Play around with the numbers and compare monthly payments by terms.
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