Decide How Much You Can Afford to Spend with an Auto Loan Calculator

Working out how much your monthly car payment will be is more complicated than dividing the amount of the loan by the number of months in the loan term. Interest, fees, and taxes add a hefty chunk to the total amount. When budgeting to buy a car, use an auto loan calculator to do the initial math so you can go car shopping with an accurate idea of how much you can pay for a car. 

Auto loan calculators typically require information like the amount of the loan, the term of the loan in years or months, and the interest rate. Some calculators will also take into account where you live, whether you plan to make any extra payments on the loan, whether you made a down payment or had cash taken off because of your old car's trade in value, how much sales tax you will be expected to pay, and even whether you must pay any fees on top of the loan. Many auto loan calculators can help you to compare getting an auto loan to leasing the same car. 

Inputting accurate answers is essential to using an auto loan calculator. Minor mistakes can add up to large variations in the amount of your monthly auto payment. When in doubt, be conservative. For instance, if you do not know exactly how much interest you are likely to pay, estimate your interest a little high. If you do not know how much cash you will be able to get back for your old car, estimate a little low. 

Play around with the numbers, using a longer or a shorter term, a higher or a lower down payment, and so on. Get a sense of how changes in the different factors change the monthly loan payment. Understanding how the different parts of an auto loan work together will be a great help when you negotiate with the dealership or the bank for funding. 

Also remember to think in the long term as well as the short term, and a low monthly payment does not always mean a less expensive loan. A $15,000 loan with 10 percent interest, paid off over three years, will cost you $484 per month, for a total of $17,424 over the life of the loan. Extending the same loan to five years will reduce your monthly payments to just $319, but you will pay $19,140 in total. An auto loan calculator that calculates the total amount of the loan as well as the monthly payment is a great way to avoid being penny wise and pound foolish. 

Buying a car is a big step. Go into it with the best information you can, and use an auto loan calculator to decide how much you can really spend. It will make the process of buying a car far more pleasant. Good luck, and happy shopping!