Are you shopping for a new car? Use this car payment calculator to determine your monthly payment amount for a car loan. By playing with the numbers and figuring out your payment details before stepping foot onto a dealership lot, you can see how much you can spend on a car while remaining within your budget without the sales pressure from a car salesman trying to sell you a car with all the options.
Total car price – Enter the price of the car along with any estimated additional fees. If you are buying a new car, you can find the vehicle’s sticker price online on the manufacturer’s website. Normally you can negotiate a discount from the manufacturer’s suggested retail price (MSRP). During certain times of the year, there may be additional manufacturer rebates that will further reduce the listed price. Remember to add in the costs of any options plus the destination fee. Once you have found a car that you are interested in, it is time to head over to the local dealership’s website where you can look up any additional dealer fees such as documentation and electronic transfer fees. To get the total car price, add all these together and multiply it by your state’s car sales tax rate. According to Edmunds, new vehicle transaction prices have hit an all time high of $34,077 in 2016.
If you are shopping for a used car, you can check the NADAGuides and Kelley Blue Book to get an idea how much the car you are interested in is worth. Then check online local sales listings, and classifieds ads for prices in your area.
Down payment & Trade-in – Enter the amount of cash you are putting down towards your new car, plus the trade-in value of your current car, if any. You can use the NADAGuides and KBB to get a rough idea of what the dealer will offer for your existing car.
It is recommended that you put a down payment of at least 20% for a new vehicle. This will prevent you from owing more than the car is worth later, especially since a car’s value depreciates the moment it is driven off the lot.
Interest rate – The interest rate is the cost of borrowing money to pay for a loan. The better your credit score, the lower the rate you will pay the bank to borrow money as they will think you are less likely to default. Rates on new cars are lower than those for used cars. You should shop around to get the best rates. Some people have said they’ve gotten the best rates from credit unions. Sometimes a car manufacturer’s finance company will offer rates as low as 0% to increase sales.
New average car loan rates for the first quarter of 2016 was 4.79%, franchise used car rates were 7.81%, and independent used rates were 12.22% according to data from Experian.
Number of months – Enter the number of months you plan to pay off the loan. You can find car loans that are between two to eight years. Ideally, you should go for the shortest loan you can afford at the best interest rate. The average new car loan is now 68 months. While most people are tempted to choose a longer term to stretch out their payments to pay less each month, the downside of this is they will be paying more in interest. Loans over 60 months have a higher interest rate. Going from a 48 month loan to a 72 month can increase the total cost of a car by thousands of dollars. Even worst is when that person gets a longer term loan so they can purchase a more expensive car that is over their budget.