Calculating Auto Loan Payments
Vrooom! Unless you live in a city with reliable public transportation, a car is a must-have item. Commuting to work. Driving the carpool. Transporting goods from point A to B. Once you find the car of your dreams, you need to figure out a way to pay for your ride.
So, you have found the car of your dreams, but how are you going to pay for it? Start searching for car loans. Investigate how much money you can use for a down payment. Become an informed consumer.
Math whizzes may be able to calculate loan payments and interest without the aid of a calculator. For the rest of us, the online auto loan calculator gives us the data to make the most informed decision about a car loan.
Auto Loan Calculators
Search online for an auto loan calculator to find out how much you are able to pay each month. Of the many available calculators, the following are good choices:
Dos and Don’ts of Auto Loans
Ask friends for advice about which car to buy. Find out what they drive. Search online for consumer complaints. Ask the right questions of friends and the dealer, including:
- Is the car or van or truck reliable?
- What is the gas mileage? City? Country?
- Recalls? See MyCarStats.com for listing of recalled vehicles.
- Look for national rankings on best cars to buy, for instance, US News & World Report and Consumer Reports.
Don’t borrow too much money. Avoid overestimating how much you can afford to pay. Make sure that the amount you feel comfortable paying fits in with other household and personal expenses. Having a huge car loan may prevent you from taking a much-needed vacation.
In a two-car household, avoid having two overlapping loans. Look at when you will need to replace the vehicles. With a loan cycle of 5 years, the replacement time for a new car would be double the number of years, i.e., 10 years. A 4-year loan would have a replacement cycle of only every 8 years. Schedule the second loan to dovetail with the first loan. A shorter replacement cycle allows for more frequent vehicle replacement.
Many choose a 5-year loan as it allows for borrowing more money without increasing loan payments. But, a longer loan increases the replacement period needed for a two-car family to avoid overlapping loans. Planning you auto purchases allows you to save on interest, stagger your loans, and set money aside for the next down payment.
If you are looking for a shorter term loan -- less than 4 years -- you may be required to pay back a higher amount. Shop around for a loan that works for you. The loan offered by the deal may sound reasonable, but by researching your options you may find a loan that has a lower interest rate.
Where To Find a Loan
Deciding on whether to use an auto loan or a personal loan is another weighty decision. While the obvious choice may be the car dealer, do your research.
Do you belong to a membership warehouse? Membership warehouses, like Costco, find deals for their members. Costco arranges pricing in advance for its customers at selected area dealers. Costco members save on buying through the Costco auto program by not having to negotiate. Check your bank for car loan deals.
Settling on a Down Payment
Think of a down payment as the first step in securing the car. By putting money down, you show the dealer that you intend to uphold the lending agreement. By paying your loan payment and ultimately paying off the loan, you will establish a good rapport with the lender.
The more you offer as a down payment the lower the financed amount on the vehicle. With high credit ratings, you may be able to opt out of a down payment. Deciding on a down payment will depend on your other debts and loans. Calculate how much you should put down with the Bankrate Down Payment Calculator.
Photo courtesy of Jonathan Pobre