One of the most important steps with any auto loan is to work out just how much it’s going to cost you. But if you’re not good at math, or you simply find yourself confused by all the ins and outs of a car loan, an auto loan calculator can help you put together both how much it will cost you in the short term, and just how much you’ll pay overall for your car. Here’s how to use them, and get the most out of them.
Get The Information You Need
First, you’ll need to collect the right information. Start with all the quotes you’ve received. You’ll need the overall amount you want to borrow, also called the principal; the interest rate you’ll be charged over the life of the loan, often written as an annual percentage rate, or APR; and the number of months you’ll be paying down the loan, usually called the term. Most auto loan quotes will have this information clearly labeled; if they don’t, read carefully through the quote you’ve been sent and make a note of it.
Next, look up the make and model of the car or cars you’re considering. Look closely at how the car is expected to depreciate in value over time, and look at how it compares to others in its class. You won’t need this for the calculator itself, but you’ll need it handy a bit later on.
Find The Right Calculator
There are many auto loan calculators, but you should look for one that has a few features. First of all, it should be clearly labeled and easy to use; you should only have to punch in a few numbers in order to get results. Secondly, it shouldn’t just tell you an overall monthly payment. A good calculator will break down your quote, payment by payment, telling you how much goes to interest and how much to principal, and will have a conclusion showing you how much, ultimately, your car loan will cost you.
Run, And Compare, The Numbers
Next, take out your quotes and start entering them into the calculator. While you may have to take a few notes, realistically, you should find that one or two of the quotes are outpacing the rest in what will fit your budget. Remember, however, to take note of what the loan will cost you overall.
This is where the value of the car comes in. Have that handy and look at what you’re paying for your car; if what you’re paying is more than the car can be expected to be worth, then the loan in question is “upside-down.” In that situation, you shouldn’t take the loan; you’re literally paying more for something than it’s worth. Remember that you’ll likely be trading in your car, so subtract that estimated trade-in value to get a better idea of just what you’ll actually be paying overall for your car.
In short, a good auto loan calculator will show you not just how much you pay for a car in a month, but how much you pay for a car over the life of a loan. With that information in hand, you can choose the quote that’s right for your budget both now and in the future.