How to Estimate Monthly Car Payments
When you’re researching a vehicle purchase, you’re going to have a lot of numbers thrown at you. The price of the car, taxes, fees, interest rate, down payment and term. And if you’re looking at several different cars, it’s a good idea to quickly calculate how much the car payments are going to be each month. The easiest way to keep track is to use an online auto loan calculator. You’ll need to know your interest rate and ballpark fees (we suggest $1,000). Simply plug in the price of the car and the other information and you can estimate monthly car payments for that car. Obviously you’ll get an exact price, interest rate and fee breakdown when you’re serious about one of your options and your actual monthly payment could go in either way $20 dollars or so.
Trades can complicate this a bit, but using online resources to assess your vehicle’s value, you can deduct this value from the new car’s price. Note that some calculators have a field for trade-ins.
Start with the Interest Rate and Vehicle Price
An online vehicle price will usually include any rebates and incentives, so start there. And, based on your credit score, you should research what auto loan rates you might qualify for. It’s best to overestimate your interest rate so that you’re pleasantly surprised at the dealer if it’s lower. Get the final price of your vehicle by adding the taxes, warranties, and other fees that apply. This is the amount that you'll be borrowing.
Calculate Your Car Payments
Now that you have the final auto loan payment and interest rate, you can start to calculate the details of your auto loan. Start by choosing the number of months you want for the loan term. If you're unsure, start with 60-months, a standard term (although some lenders are offering 72, 84 and even 96-month terms).
Use our auto loan calculator to plug in the values you estimated.
How much will you end up paying over the life of the loan? Simply multiply the monthly payment by total months in the term. Subtract the amount borrowed from this number and you’ll see what you’ll be paying in total interest. Play with different terms and interest rates to see how they affect your monthly payment. Even if you don’t stick to these numbers when you’re ready to purchase, it’s helpful to see how different factors can influence your car payments.
How to Choose the Loan Term
One thing that you should be aware of is the fact that you'll get lower interest rates for shorter payment terms. The difference can be as much as a half percent. This can save you hundreds, even thousands of dollars on your total payments. Of course, going with shorter loan terms means that you will have to pay a higher monthly payment. So, you have to make a decision whether it's worth paying higher monthly payments to save money in the long term. If you are bringing in an income that can easily cover the costs and you have savings to back you up, then it's probably the best decision. Of course, if your financial situation changes, you can always try to refinance your auto loan.
And remember, most lenders, including Truliant, feature auto loans with no prepayment penalties. It’s not uncommon for buyers to sign a six year term to get a more manageable monthly payment, but pay off the loan sooner as funds allow. Please note that you are more liable to carry negative equity the longer your term.