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How to Calculate Car Payments

Are you applying for a car loan to buy your next vehicle? It's important to know how much you'll have to pay the lender each month — and for how long. Instead of waiting to be surprised when you actually sign for the loan, you can be proactive and calculate approximately how much your monthly car payments will be.

Car keys laying on top of a calculator.

Which factors should you consider when calculating a car payment?

When calculating your monthly car payment, you'll need to know the following factors:

  • The price of the vehicle you want to purchase: Especially if you're purchasing a used car, it can be helpful to shop around for the best deal.
  • The cost of any add-ons: If you're buying any add-ons such as an extended warranty, paint and fabric protection, or key protection, it will increase the total cost of your loan.
  • Title, taxes, and non-negotiable fees: You should be aware of title fees, as well as any state and local taxes.
  • Negotiable fees: You can often negotiate some of the loan fees, such as origination fees, preparation fees, and document fees.
  • Your down payment: The larger your down payment, the lower the total cost of your loan.
  • The trade-in value of your old vehicle: The higher the value of your trade-in, the lower your loan will be.
  • The interest rate on the loan: The interest rate your lender offers you will be determined by several things, including the Federal Reserve interest rates, the loan type and term, your credit score, and your debt-to-income ratio.
  • The length of the loan: Determine how many months the term of the loan will be.

Download this handy worksheet from the Consumer Financial Protection Bureau to help you list out this information.

What you need to know about interest on your car loan

The interest rate your lender offers you will likely be lower on a new car than on a used car. Also, keep in mind that although the interest rate itself will remain the same throughout the life of the loan, the actual dollar amount you'll pay each month will diminish over time as you pay down the loan. Because of this, it's quite challenging to calculate your monthly car loan payments yourself — unless you're a math wiz!

Calculating your car payment with a car loan calculator

With all this information in hand, you can use one of several free online car loan calculators that are available:

  • If you do a Google search for "car loan calculator," you'll see a calculator appear right below the paid search results.
  • Investopedia provides a free auto loan calculator where you can either fill out the interest rate or your credit score to get a result.
  • Nerdwallet also offers a car payment calculator, but this one asks for both your credit score and the interest rate.

It's important to remember that these calculators are likely to only provide an approximation of your monthly payments. For the precise dollar amount, you're best advised to discuss your situation with the lender you want to work with before making your final decision.

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