Use A Payment Calculator Before Purchasing A Car?

Answer 1

Buying a new or used car involves doing some homework regarding the monthly payments. Besides the financing available at the dealership or through the manufacturer, buyers have the opportunity to secure their own contract from an online bank or finance company. Most of these sites have a handy tool known as a car payment calculator. This gives prospective shoppers the opportunity to see how different interest rates and loan terms affect the monthly payment as well as the total amount paid over the life of the loan.

Figuring The Interest Rate

The price of the car minus the down payment equals the loan amount. Increasing the amount paid up front will reduce the total principal on the loan at the time of purchase. A payment calculator tool is used to see how different interest rates affect the monthly payment. It is important to find out if any one finance company offers a lower interest rate when a different beginning balance is used.

Buyers can enter the amount of the loan along with the interest rate into the appropriate fields on the calculator tool. The resulting figure is the monthly payment. This tool also shows exactly what the total interest charges will be over the life of the loan. Buyers can enter multiple percentage rates to see how it changes the total amount that must be paid. The term of the loan can be set for any number of months.

Negotiating With The Finance Company

It is wise never to let the dealer or the finance company know exactly how much money can be put down for a new or used car purchase. It is a far better practice to do the homework ahead of time and then start out making an offer based on the results. In most cases there are several different combinations of down payment and loan term that result in affordable monthly payments. Before deciding on a purchase, ask the dealer if the interest rate offered is the same for all trim levels. This may mean sacrificing some optional amenities on the desired vehicle, but can save a tremendous amount of money. The car payment calculator tool helps choose which vehicle is the best investment in terms of the loan balance progression versus the car's resale value.

Use The Tool When Refinancing

Many car owners have had to settle for a higher than average rate of interest on their new vehicle purchase. After a number of payments have been made, refinancing the car may be a good way to save on monthly payments. The calculator tool can be used to compare the offers made by different finance companies. In most cases, lenders that specialize in refinancing will have differing interest rates based on the loan term. A term of 36 months may actually carry a higher interest rate than a loan term of 48 months. If the total amount paid over a three or four year period is important to the buyer, using the calculator tool becomes invaluable.