Shopping for an auto loan may not be as exciting as shopping for a car, but if you calculate car payments before you visit the dealership, you may end up saving money. Use our auto loan calculator to estimate monthly car payments and find the lowest rates available. Then you can shop for the vehicle that fits your budget and negotiate the best deal.
|Source: Rates as of June 2019 from MyFICO and Interest.com. Excellent credit assumed in rate averages.|
Bankrate’s auto loan calculator will give you a good idea of how much car you can afford from a monthly payment standpoint. Start with a list of vehicles that you’re interested in and estimated purchase prices. Then subtract the amount of money you can use for a down payment and an estimate of your current car’s trade-in value. Lastly, compare costs to make sure that the calculated auto loan payment based on the amount you need to borrow aligns with your monthly budget.
(Remember: This auto loan calculator doesn’t account for things like taxes, documentation fees and registration costs. Assume that you’ll pay around 10 percent more than your auto loan calculator estimate. To get a more precise idea of how much more your monthly payment will be if you roll these extra costs into your loan, simply divide the total amount of the extra fees by the number of months of your loan. For example, if you’re taking out a five-year loan and your extra fees are $3,000, your monthly payment will rise by $50 per month, or $3,000 divided by 60 months.)
Enter the amount you need to finance your car into the auto loan calculator. To calculate this, subtract your down payment and trade-in value amounts from your car’s sticker price or MSRP. Most customers try to put 15 percent to 20 percent down. To estimate your current car’s trade-in value, use an online reference guide like Edmunds or Kelley Blue Book; be sure to subtract any amount you owe from a previous auto loan from this price estimate.
Your loan term -- or the amount of time you’ll be paying back the loan -- will impact the price of your monthly car payments. With a shorter-term auto loan, your monthly payments will be higher, but you will have a lower APR and pay less in interest in the long-run. Use the auto loan calculator to see the difference in monthly payments and interest paid depending on the term of the auto loan.
Most APRs will be higher for a used car auto loan since used car values can vary greatly depending on the history, condition and miles driven.
Enter an interest rate based on your credit score and loan term. Check out Bankrate’s Auto Loan Rates for some current average APRs.
The auto loan calculator will display your estimated monthly auto payment. You will also see the total principal paid (the amount you paid upfront) and the total interest paid. Add these two figures together to see the total amount you will pay for your new or used car over the life of the loan.
Getting pre-qualified with multiple lenders can help you avoid sour deals at the car lot. It’s free, and there’s no impact to your credit score; for a pre-qualification, only a soft inquiry to your credit is made. (A hard credit inquiry will be made during the pre-approval process.
Compare your pre-qualification rates with those you get from the salesman at the dealership. If your rates are significantly lower (more than a few points), there’s a good chance the dealer is hiking rates to earn a commission. If the dealership doesn’t match the rate you were quoted by the lender in the pre-qualification process, go with the lower rate rather than dealer financing.
Never cosign for an auto loan. Yes, they may need your help. Yes, they may be a great friend or your own flesh and blood. But it's never a good idea - especially if you aren't planning on having to pay off the entire loan when the person who signs for it defaults.
Before going to the car lot, try lining up your financing at a local credit union first. Credit unions often offer better rates than banks and financing companies at car dealerships. Once your financing is lined up, you'll know how much you can spend on a car.
Don't buy a car you can't afford. Too often car shoppers think about the final number they are willing to pay and don't factor in taxes, title fees and other expenses. These extras often add up to more than a buyer can comfortably pay.