.jpg)
One of the first steps in buying a car is determining how much money you will need to borrow so you can drive your new ride off the lot. Some people get caught up in the heat of the moment and sign on the dotted line before they realize how much money they will be paying a month in car payments. If they had taken the time to use an auto loan calculator, they could avoid the surprise when their payments become due.
A simple auto loan calculator starts by determining the amount of money that you need to borrow for a car. Once you have that amount, you need to determine the term for the loan, how long the loan is for in months and years. You then need to factor in the interest rate that is established once you get the loan. For example, if you are taking out an auto loan for $15,000 with a 48 month term and a 10% interest rate, your monthly auto loan payment will be $380.44. Having a clear idea of how much you will spend each month on your car payment is smart for your own personal economy.
Many lenders and auto dealerships have an auto loan calculator on their websites that can help you determine the exact amount you will pay each month for your car payment. While you can do the math with the example shown above, many of these calculators are also helpful tools and can actually help you find the most competitive rates for auto loans in your area.
Once you have calculated the costs of the car by deducting the amount of your down payment and trade in value of your current car, you are left with a number that you will need for your loan. Another factor you should use in an auto loan calculator is insurance costs. While this is a separate line item on your budget and a separate payment, you can figure out the total monthly payments for the car loan and the insurance. This will give you a bigger picture in terms of what you will be laying out financially for the car and can help you in determining whether you can afford the car you wish to purchase and if you have the best financing deal available.
Using an auto loan calculator can end up saving you money in the long run. You can use the data you come up with to find the best financing or negotiate a lower interest rate. When you know all of your numbers and use the formula above, you can determine how much your car payment will be each month and how much the car will cost you in terms of both the loan payments and the insurance premiums.