Auto Loan Calculator

This calculator computes monthly automotive loan payments.

The Very first Necessary Step in the Car Buying Process

Whether you buy fresh or used, it’s wise to get pre-approved for a loan before you ever step on a car lot. Go to your bank or credit union and ask the agent if you qualify for a loan and how much. The agent will check your FICO credit score and other obligations and provide you with an amount and interest rate. A FICO score can be inbetween three hundred and 850. The higher the score the lower the interest rate you will be suggested. People with a bad credit history may pay interest rates that are more than dual prime rates. You can also shop for auto loans online if you aren’t worried about where your private information goes. Armed with a pre-approved loan you are now in control and have a choice to go with dealer financing or stick with your bank, whichever rate is lower.

How to Get the Best Deal

Got fresh car fever? Well, very first, you need to do a little homework. With the internet, the mystery of the automobile buying process has been unveiled and you can be a well-informed buyer ready to negotiate for the best price. Very first of all, go to ConsumerReports.org to check out vehicle reliability. You may be eying that shiny crimson sports car, but if its review states that this manufacturer has a history of poor spectacle or something like electrical issues, you may want to reconsider.

Test drive the vehicle you have in mind, but renting one from a car rental company for a duo days is the ultimate test.

The Internet has Switched Automotive Shopping

After you have determined the car you want to buy, go to Edmunds.com to find the invoice price. Do not shop without this information in palm. It’s your leverage in the negotiating process. If you don’t have this chunk of information, the dealer will work from the MSRP which is a much higher price. Consider MSRP as retail price and invoice price as dealer cost. Never pay higher than invoice price. And don’t worry, the dealer still makes a profit. There is something called “holdback” which the manufacturer gives the dealer for each vehicle. It’s usually 2-3 % which they receive quarterly. At times the manufacturer also offers dealer incentives for specific models.

You can shop online and get instant automobile quotes at sites like CarsDirect and TrueCar. If you are not comfy buying online you can always use their quotes to see if the traditional dealer will match the price.

If you have looked ahead and planned your purchase, note that some times of the year are better than others to buy a car. Salesmen work on commission and have monthly, quarterly and yearly goals to meet. So buying at the end of one of these periods can save you money, especially if the salesman hasn’t hit his quota.

If you have made a decision on the exact vehicle you want, visiting the dealership late in the day may work to your advantage because everyone is anxious to go home. Aside from the information we provide here, you may want to read some private stories of sale negotiations to better visualize and prepare yourself:

• “How to Negotiate for a Used Car” – The Art of Manliness
• The “Four-Square” Mechanism that Dealers Use, and How to Strike It – The Consumerist
• One stud’s trade-in value dispute with a dealership after using TrueCar – also from The Consumerist

Understanding 0% Financing vs. Factory Rebate

Many times dealerships will suggest a choice of 0% financing or a factory rebate. How do you know which is better? Figure out the interest you would pay for the life of the loan if you financed with your bank. If the interest is more than the rebate, then take the 0% financing. For example, using our loan calculator, if you buy a $20,000 vehicle at 5% APR for sixty months the monthly payment would be $377.42 and you would pay $Two,645.48 in interest. If the rebate is $1,000 it would be to your advantage to take the 0% financing because the $1,000 rebate is less than the $Two,645.48 you would save in interest. Be aware tho’, that unless you have a good credit rating, you may not qualify for the 0% financing and this option may only be suggested on selected models. People with poor credit are a major source of profits because they can be charged far higher interest rates. Some “buy here, pay here” dealerships specifically concentrate on subprime borrowers.

Some Used Cars Are a Real Bargain

Before you take the plunge of buying a fresh car, consider a used one. Frugal shoppers know that fresh cars depreciate as soon as they are driven off the lot, and in fact lose on average 15-25% of its value each year the very first five years. Buying one that’s a duo years old can still provide you with a reliable vehicle for thousands less while letting someone else take the depreciation hit. If you trade in every few years then depreciation is something to consider, so look for vehicles that traditionally hold their value such as Honda, Toyota or Lexus. If you keep your automobile until it falls apart, then depreciation is not a concern for you. Fresh models for the upcoming year usually arrive late summer or early fall. Albeit selection may be limited, this is a good time to consider buying last year’s model because the dealer will need to make room for the fresh ones.

Check the used car history by the VIN# on sites like Carfax or Autocheck. This will help eliminate anything that looks questionable. Anything that says it’s a “salvage” should raise a crimson flag . Salvage vehicles are those in accidents that the insurance company has determined repair costs are more than it is worth. Some shops will attempt to repair them and sale them at a steep discount. These are given salvage titles. Unless you are mechanically savvy, it’s best to avoid these. On the other palm, something called a “program car” is usually an exceptional bargain. A program car is a one that was driven on company business by a manufacturer employee. They are driven very little and are well maintained. They usually have Ten,000 miles or less on the odometer. Dealers pay low prices for them and are not timid to advertise them. They usually still have factory warranties. Still not wooed to buy used? Then consider insurance costs on a used car will typically be significantly less expensive than on a fresh one.

There’s More to a Loan than a Monthly Payment

When it comes to borrowing money, a wise shopper looks at the total cost of the loan, and not just at the monthly payment. Too many advertisements state only the monthly payment. You need to dig deeper to see the real story. In general, a lower interest rate will cost you less money. A $20,000 loan at 5% for sixty months (Five years) will cost you a total of $22,645.48, whereas the same loan at 3% will cost you $21,562.43. That’s a savings of $1,083.05.

That same wise shopper will look not only at the interest rate but also the length of the loan. The longer you open up out the payments, the more expensive the loan will be. Let’s take that same $20,000 loan above at 5% at five years and see how much we can save by paying it off in three years. So, $20,000 at 5% for thirty six months will cost $21,579.05 saving you $1,066.43. Using the calculator above (assuming $0 down payment, $0 trade-in and 1% sales tax) you will see that the monthly payment for the five year loan is $377.42 and the monthly payment for the three year loan is $599.42. If you can lightly treat the higher payment the savings are well worth it.

If your credit drastically improves & your initial loan was at a higher interest rate, it may be worth looking into refinancing at a lower rate.

What To Do with Your Trade-In

Albeit it’s convenient to trade in your old vehicle to the dealer at the time of purchasing another, it’s not to your best advantage. You are likely to get the least value from the dealer, as they have to stir it yet again and need to ensure a safe profit margin on selling it. They do not have to take your old automobile, and will suggest you what will make them the highest profit. Some dealerships may suggest artificially high trade in values, but only suggest them in association with a higher price on the vehicle they sell you.

The better option is to sell it privately. It seems even government agencies are loosely providing out this advice; from the Arizona Attorney General to the FTC. Don’t underestimate the value of your old car. Go to Kelly Blue Book online to do your valuation research. If you can sell it, even for a petite amount, it’s extra bargaining power for your fresh vehicle.

Another option with your old automobile is to keep it. An old pick up truck used for mighty work can help protect the value of a fresh vehicle by minimizing wear and rip, along with depreciation. Automotive insurance companies typically suggest numerous vehicle discounts.

Related movie: