A car is one of the necessities in today’s world. When you have a vehicle, it’s much easier to get around, which is why you’ve likely wanted a car or truck at some point in your life.
When you own a vehicle, you don’t have to rely on public transportation, and you aren’t reliant on train and bus schedules, but vehicle ownership also comes with a large price tag. Car finance companies are helpful because they lend the money qualifying borrowers need to purchase a vehicle and spread out payments over a period of time, making it more affordable to get the vehicle they want.
If you’re planning to buy a car, it’s wise to use a car finance calculator to estimate your monthly expenses.
How Does a Car Payment Calculator Work?
First, you need to find the calculator you want to work with. Start by locating one online, such as this car finance calculator at Investopedia.
Once you have the calculator in front of you, you’ll see that it’s broken down into sections.
First, you’ll enter the car’s price. The next line requires you to enter information about the down payment. Are you planning to put any money down? If not, move the slider bar to zero. If so, adjust the slider until it displays the correct amount, or type it in. Next to the vehicle’s cost, the calculator shows you what percentage of the car’s price you’re providing as a down payment.
Below this field, you’ll see another for the loan’s term. Select the term you’d like, ranging from 24 to 96 months. This field determines how to spread out the monthly payments over time.
In the last field, enter your interest rate (if known) or your current credit score. When you type in your credit score, the calculator estimates the interest rate you could receive based on that factor.
Once you input all that information, you’ll see a graphic that shows your estimated monthly payment, how much interest you’ll pay and the total principal balance of the loan.
Calculate Your Loan in Advance to Avoid Surprises
Working out loan estimates in advance can help you avoid surprises when you speak with lenders. It may also save you time when you’re looking at vehicles since you won’t waste time considering vehicles you can’t comfortably afford. You can manipulate the numbers until you find the sweet spot that’s right for your financial situation.
