Purchasing a vehicle usually requires a significant financial investment. Even a modestly priced vehicle—let’s say $8,000 to $10,000—is more than most people can afford to pay with cash. Which means most people need to take out an auto loan in order to buy a car. But loans come with monthly (or bi-weekly) payments, and it can be hard to figure out how much you’re likely to pay once you factor in things like the loan term, the interest rate, the payment frequency, and the trade-in value. To be totally honest, it’s pretty confusing. But don’t worry. Our car loan calculator can do all the hard work for you.
If you’re planning on financing your new vehicle purchase, the overall price of the vehicle isn’t really the number you need to pay attention to. The most important number, for you, is the payment. Because, as our auto loan calculator will show you, the price you ultimately end up paying depends on how you structure your deal.
The factor that will change your monthly payment the most (other than the price of the vehicle) is the loan term. The longer your loan, the less you’ll pay each month, because you’re spreading out the loan amount over a greater number of months. However, due to the interest you’ll be paying on your loan, you’ll actually end up spending more for your vehicle by the time your payments are over. Why? Because the more time you spend paying off your loan, the more times you will be charged interest.
Speaking of interest, the interest rate is the second most important number to consider when structuring a car loan. The interest rate (typically a number between 0 and 29.99%) is the percentage of your purchase that is added to the cost of your vehicle annually. So, if you buy a vehicle with 4.99% financing, then you’re paying roughly 5% of your vehicle’s overall price in added interest every year.
Next, consider how much your vehicle is worth if you’re trading it in. If you’re trading in a vehicle that’s worth $7000 and you’re buying a vehicle that’s worth $22,000, then you will only have to take an auto loan out for $15,000 (the difference between your new car’s value and the amount of money you’re getting for trading in your vehicle).
However, if you still owe money on the vehicle you’re trading in, then it’s a good idea to use our car financing calculator. This is because you might end up paying more than you expected to. Let’s say your trade-in vehicle is worth $7000, but you still owe $9000 on it (from your previous loan). That means, once you trade in your vehicle, you will still owe another $2000. The dealership will simply take this remaining $2000 and add it to the value of the new vehicle you’re looking to buy. So a $20,000 vehicle suddenly becomes a $22,000 vehicle. As a result, your payments are going to be a little higher than they normally would.
As you can see, there are a number of factors that determine what your payment will be. In fact, this isn’t even all of them. Scroll to the next section to get a full rundown of each item in our car loan calculator.
By now, you should have a better understanding of how our auto loan calculator works. So, scroll back to the top of the page and give it a try. Plug in different values to see how each affects the final payment amount.
If you’ve learned anything today, we hope it’s that it’s important to weigh all factors when buying a vehicle, either new or used. Our car financing calculator will be a great tool to help you plan your next vehicle purchase.
It can help determine how much money you want to put down (however, a down payment is usually not required). Based on how much your trade-in value is, it can be a great help when deciding what kind of term you want to choose. Note: some interest rates are term-specific, so even if your credit history says you can get 1.99% interest, for example, you may have to choose a certain term length in order to qualify for that interest rate.
Know that there isn’t one “best” way to get the lowest monthly payment. Everyone’s situation is different. It depends on your trade-in value, your credit history, your desired term, how much your willing to put down at the time of purchase, etc. If you’re on a tighter budget, then choosing the lowest payment possible could be the best way to go. However, if you’re able to pay more each month, then you’ll be able to take a shorter term and have your vehicle paid off faster (and with less interest).
There’s no easy answer here. But your friends at Go Auto are definitely here to help. If you have any questions about the financing process, don’t hesitate to contact us. Our Happy to Help agents are available 24/7 by phone or text (780.777.7777), email (email@example.com), or online chat right here on GoAuto.ca.