This auto payment calculator figures monthly payments for the...show more instructions
Which Auto Payment Fits Your Budget?
Before you buy a vehicle, it's a good idea to look at all your auto payment options.
The most common auto payment terms are 12, 24, 36, 48, 60, and 72 months. Each loan term will produce a different monthly payment because of the difference in amortization.
Comparing the impact each of these different loan terms will have on your budget can be difficult.
This Auto Payment Calculator makes it easy by showing the required auto payments for each of the most popular loan terms so you can select the one that best fits your budget and personal financial goals.
Below are helpful tips and and best practices so that you can maximize the value you get for any given auto payment when buying a vehicle.
Related: 5 Rookie Financial Planning Mistakes That Cost You Big-Time (and what to do instead!) Explained in 5 Free Video Lessons
Best Practices When Buying A Vehicle
Before walking on the car lot to purchase a vehicle, it is important to ask yourself a few key questions:
- What is my purpose for buying a vehicle?
- How much can I afford to spend?
- What is the maximum monthly auto loan payment that fits my budget?
- What are the features I would like to have in my vehicle?
- What type of vehicle do I need?
Once you've answered those questions, then you can begin shopping without being dangerously swayed by emotions. Below are tips to help you during your time on the car lot.
- Nail down the right deal. Don’t be swept away with the dealership offers and don't let the salesman intimidate you into rushing your decision. Choose vehicles that best fit your needs and then compare total costs including incentives and rebates. Calculate how much you need to pay each month using the Auto Payment Calculator. Most importantly, look out for hidden charges and upsells. Once you've assembled all the facts then you can get the right deal for your needs.
- Listen to the experts. Read the expert reviews and ratings in the consumer magazines, and then follow-up by researching actual consumer reviews from real people who bought the same model of car. This information is available online – usually for free. Whether you've found the vehicle you want through your own research or have been directed to a dealership by a buying service, do your homework and compare it with other vehicles.
- Take a test drive. Nothing beats direct experience for deciding if the vehicle fits your needs. When test driving the vehicle pay attention to interior and exterior features for ride comfort, noise, power, acceleration, braking and handling.
- Don’t let the sales agent pressure you. Auto salesman are famous for their sales and pressure tactics. Car dealers may make you feel that there is great demand for the model you like. They will try to create a deadline of sorts to motivate an impulse decision. They may even tell you that a special deal is only for a limited time. But remember, if the model you like is no longer available, the car dealer will probably give you all sorts of other offers rather than lose the sale. So take your time before signing on the dotted line.
Paying With Cash Vs. Financing With Auto Payments
Now that you've decided which vehicle to buy and you’ve got the best deal, what’s next? Are you going to pay cash or apply for auto financing?
Not everyone can afford to pay for their new vehicle with cash. Or maybe you have the cash but don't want to deplete your savings.
The reality is an auto loan with monthly payments will increase the cost of your car by the amount of interest. The longer the loan term the more that vehicle will cost you. That is why, in many cases, it is better to pay cash for your new auto vs. over time with payments.
If you choose to buy your car through financing, take into consideration that the sales agent is working on a commission. They will try to up-sell you items like warranties, car alarms and other accessories. Car dealers can make a lot of money by selling these add-ons so don't be pressured!
How will you know if you can really afford an auto payment if you haven't determined a reasonable transportation expense range for your income?
Our Budget Calculator can assist you in figuring out a proper amount you may spend when making auto payments. Try that calculator in conjunction with the Auto Payment Calculator to make the best possible decision about what car fits your financial situation.
Remember though, if you have cash in the bank, and buying a vehicle is a necessity, consider using cash instead of financing. You'll save a great deal of money in interest and the vehicle will be much more enjoyable to drive knowing you don't have debt slowing you down.
Auto Payment Calculator Terms & Definitions
- Amount Financed – The amount of money borrowed from a financial institution to purchase the vehicle.
- Auto Payment – An amount paid usually on a monthly basis for a financed vehicle.
- Annual Interest Rate – The annual rate that is charged on the borrowed money expressed as a percentage number.
- Loan Term – The amount of time (in this case, expressed in months) that the loan is set to be repaid over.
- Commission – An amount of money, typically a set percentage of the value involved, paid to an agent (a car dealer in this case) in a transaction.
- Financing – The borrowing of money as a means to purchase an item (in this case, a vehicle).
Related Auto Loan Calculators:
- Car Payment Calculator: How much will my monthly car payment be?
- Compare Car Financing Choices: Which car financing choice is the best deal?
- Lease vs. Buy Calculator: Should I lease or buy?
- Car Lease Calculator: How much will a lease cost me?
- Car Cost Calculator: What is the true cost of ownership and driving for my car? How does the cost of one car compare to another?
- Car Rebate vs. Financing Calculator: Which dealer incentive is the best value – rebate or special financing?
- Auto Loan vs. Home Equity Calculator: Should I buy my next car using a conventional auto loan or home equity line of credit?