Determining your monthly car payment is more complicated than taking the amount of the loan and dividing by the number of months. 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 typically require information like the amount of the loan, the term of the loan in years or months, and the interest rate. 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 cars 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. Many auto loan calculators can help you to compare getting an auto loan to leasing the same car.
Inputting accurate answers is essential to using an auto loan calculator. Minor mistakes can add up to large variations in the amount of your monthly auto payment. When you do not know the exact answer, estimate conservatively. 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.
Play around with the numbers, using a longer or a shorter term, a higher or a lower down payment, and so on. Get a sense of how changes in the different factors change the monthly loan payment. When you go into the dealership or the bank to get funding, you will need to negotiate, and it will help you immensely to know how all the options you are offered will affect your pocketbook.
Also remember that lower is not always better. A $15,000 loan with 10 percent interest, paid off over three years, will cost you $484 per month, for a total of $17,424 over the life of the loan. Extending the same loan to five years will reduce your monthly payments to just $319, but you will pay $19,140 in total. 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. Start the process with the most accurate information you can get, and use an auto loan calculator to check your math and work out how much of a loan you can afford. It will make the process of buying a car far more pleasant. Good luck!