Purchasing a vehicle can be incredibly exciting, but there are some things you need to do before you start looking at the latest car models. One of the first things you should do is to use an auto loan finance calculator. An auto loan calculator can help you figure out how a new car fits into your budget and which cars best fit your financial situation. These calculators can also make the car purchasing process easier and help you get the best deal for your money.
Before you input information in an auto loan calculator, it helps to know what your exact budget is. This way, you can quickly determine if the monthly payment the loan calculator estimates will actually fit your budget. And, remember, you’ll be paying not just for the total amount of the car but also for gas, maintenance, emergency repairs, and insurance. A new car would be useless if you couldn’t afford to keep it running after it shows signs of poor road performance of if you couldn’t afford to regularly fill the tank with gas.
Make car shopping easier by calculating possible monthly payments first then choosing the car that best fits your budget. List down at least three vehicles and use an auto loan calculator to get estimates on the monthly payment amount for each vehicle. Pick the car that fits your budget best. Thanks to additional costs like taxes and fees and registration costs, it’s safe to assume that you’ll be paying around 10% more than the estimate the loan calculator will give you.
An auto financing calculator will require you to input various figures so you can get an estimate of the amount of money you’ll be paying each month for your car. The figures you’ll need to input include the car price, the interest rate, and the loan term. For the car price, input the amount you think you’ll pay for the car you want after negotiations. You can do a quick online search for car prices and put in the average price.
The interest rate greatly depends on your credit score. A poor credit rating usually results in a higher interest rate, so you’ll be paying higher monthly payments. For instance, if you have a credit score of 501, the average annual interest rate you’ll get for a new car is 12.14%. In contrast, a credit score of 665 will get you an annual interest of just 4.45%. If you really want to get the best interest rate, consider improving your credit score before applying for a car loan.
When it comes to loan terms, you want to keep things short and sweet. Keep in mind that the longer your loan term is, the more money you’ll end up paying towards interest. Auto financing experts recommend choosing a loan term of no more than 60 months for new cars. If you’re looking to buy a pre-owned vehicle, try to keep the loan term to 36 months at most.
Some auto loan calculators will also let you enter trade-in and down payment information. For this field, enter the total amount of cash you can pay upfront for your vehicle, plus the trade-in value of your current car. A bigger down payment can help lower your monthly payments, so you’ll want to pay a sizeable amount of cash up front, if possible.
An online loan calculator is one of your best tools in setting your expectations when it comes to the money you’ll be spending during the car purchasing process. Use the loan calculator as often as you want as you shop for quotes from different car dealers and as you get loan offers from various lenders. Enter different down payment amounts and play with loan term lengths to come up with a monthly payment that will best fit your budget.
Compare the loan calculator’s results to the loan pre-qualification details you get from lenders. This way, you’ll know if you’re getting an overly inflated interest rate for your credit score.