We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.
Finance

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

What is the Best Way to Compute a Car Payment?

By Amanda Lacasse
Updated: May 17, 2024
Views: 2,960
Share

Buying a new or used car often necessitates financing the cost rather than paying the entire price up front. To be sure an additional monthly bill will not throw the household budget into chaos, a consumer should figure out ahead of time what the payment will be. To compute a car payment before actually buying a car, a buyer need to know the cost of the vehicle, the size of the down payment, the interest rate on the loan, and other expenses such as sales tax, destination charges and any fees. Most importantly, the consumer needs to have a good idea of how much he can afford to pay before determining how much the car he wants to buy will cost him.

Many financial web sites offer loan calculators to help consumers figure the amount of their monthly car payment. Such calculators often do not take into account the extra expenses that are both part of purchasing a car and required to correctly compute a car payment. Once a buyer has decided the price range he can afford and how much the down payment will be, the next step is to find out what other expenses need to be calculated into the car loan payment.

One important piece of information necessary to compute a car payment is the interest rate. Car dealers may or may not have competitive rates, so consumers should check with other financial institutions to compare. Another important factor is the term of the auto loan. Experts acknowledge that longer terms make a buyer's monthly car payment more affordable, but also note that taking a term for more than 48 months is risky. The extra interest payments add quite a bit more to the total cost of the vehicle and, if the car is stolen or considered a total loss in an accident, the insurance payment may not cover the remainder of the loan.

To accurately compute a car payment on a new car, the buyer needs to know each additional fee or charge that will be rolled into the cost of the vehicle. These fees almost always include sales tax, destination charges, title fees, and registration and/or license fees. These fees often add up to a sizable amount and could alter the size of a monthly car payment, so it is important to estimate them as closely as possible. Once these charges have been calculated and added to the total cost of the car, that information can then be plugged in to the "loan amount" section of an online auto loan calculator to give the buyer an approximation of what his monthly car payment will be.

Share
WiseGeek is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.

Editors' Picks

Discussion Comments
Share
https://www.wisegeek.net/what-is-the-best-way-to-compute-a-car-payment.htm
Copy this link
WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.

WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.