Car Loan Calculator

Simple Car Loan Calculator: What Will Your Monthly Payment Be?

Buying a new car is exciting. It is fun to pick out the color and test drive the features. But the fun stops when you have to talk about money.

A car is likely the second biggest purchase you will ever make. You need to know exactly how much it will cost you every month before you sign any papers.

This is why a car loan calculator is so helpful. It does the hard math for you. It helps you see if that new car fits your budget or if it will make your life stressful.

The Numbers You Need to Know

To get the right answer from the calculator, you need to put in the right numbers. Here is what they mean in plain English.

1. The Vehicle Price This is just the total cost of the car. You can find this on the sticker in the window or on the dealer’s website.

2. Down Payment This is the cash you pay right now. When you pay more cash upfront, you borrow less money from the bank. This makes your monthly bill smaller.

3. Interest Rate This is the fee the bank charges you for lending you money.

• If you have a high credit score, this number will be low.
• If your credit score is low, this number will be high. Even a small difference here changes your payment a lot.

4. Loan Term This is how many months you will make payments.

• 36 to 48 months: Your monthly bill is high, but you pay off the car fast.
• 60 to 72 months: Your monthly bill is lower, but you are in debt for a long time.

Watch Out for the “Monthly Payment” Trap

When you go to a car lot, the salesperson will ask you one question: “How much do you want to pay a month?”

Be careful with this question.

If you say you want to pay $400 a month, they can make that happen. But they might do it by making your loan 7 or 8 years long.

This is bad for you. It means you will be paying for the car long after it gets old and starts having problems. You will also pay thousands of dollars more in interest fees to the bank.

Using a calculator at home lets you see the truth. You can see the total cost of the car, not just the monthly bill.

Don’t Forget Taxes

Most people forget about taxes. If a car is listed for $30,000, you will not pay $30,000. You have to pay state sales tax and dealer fees.

A good rule of thumb is to add 10% to the price of the car in the calculator. This gives you a much more realistic idea of what you will actually pay.

The Bottom Line

Don’t let the dealer do the math for you. Use a car loan calculator at home first. When you know your numbers, you can walk into the dealership with confidence. You will know exactly what you can afford, and you won’t get stuck with a bad loan.