Calculating your auto loan payment before going to the car lot can boost your negotiating power and help you choose the best loan for your budget.
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How to use the car loan calculator
While you can’t calculate your monthly car payment to the penny, having a good estimate will put you in the driver’s seat at the dealership and help you compare auto loan offers.
Here’s how to use the auto loan calculator and a look at the different numbers that will make up your car payment.
- Car price: In this field, put in the price you think you’ll pay for the car after negotiations.
- Trade-in and down payment: Enter the total amount of cash you’re putting toward the new car, plus the trade-in value of your existing vehicle, if any.
- Interest rate: You can enter the rate you’ve qualified for or estimate your rate based on your credit score using the dropdown menu at the top of the calculator.
- Number of months: Enter the loan term, or how long you plan to take to pay off the loan.
- Results: There’s no need to search for a “calculate” button. Simply put in your numbers and the results will update immediately.
In addition to looking at the monthly payment result, be sure to face the cold, hard reality of how much you’ll pay in interest. If that’s not sobering enough, look at the total amount you’ll spend on the car loan (this excludes the down payment).
By changing the trade-in or down payment amount, the interest rate or loan term, you’ll see how it impacts your car payment and total loan costs so you can compare offers.
Use NerdWallet’s car value estimator to quickly see how much your car is worth.
|Credit score||Average APR, new car||Average APR, used car|
|Source: Experian Information Solutions|
|Deep subprime: 300-500||14.07%||19.81%|
Keep in mind that rates on new cars will be lower than for used cars. Sometimes, carmakers’ finance companies will even offer rates as low as 0%.
You’ve calculated your car payment. Now what?
This calculation doesn’t include taxes and fees. You’ll have to pay state and local sales tax, a documentation fee (which varies widely) and registration costs. The simplest way to handle this: Add 10% to the loan payment you came up with.
Even though this is only an estimated loan payment, it will give you valuable information before you sign on the dotted line:
- You can see if the car you want fits into your budget. Remember, your monthly car payment is just a portion of your total car costs each month. A useful rule of thumb is that your total car expenses shouldn’t be more than 20% of your monthly take-home pay.
- Having an estimate in hand can protect you from overpaying at the dealership. If the salesman hits you with high payments, you’ll be well-equipped to negotiate.
Use this auto loan calculator as you begin the journey of shopping for a new car. Revisit the calculator as you get quotes from dealers or after getting a loan offer from a lender. Try entering different down payment amounts and loan lengths to see what best fits your budget. As your numbers become more specific, your monthly auto loan payment will become more accurate.
If you run these simple calculations ahead of time, you’ll wind up with a loan you can live with.