When it comes to buying a car, you can’t take chances. After your house, your car purchases are some of the most expensive purchases that you’ll make. It’s important to make a good decision when it comes to financing because, if you’re like most people, you’ll be paying for that purchase for 3-5 years, and sometimes up to 7 years. Here’s how using a car purchase calculator can help you.
Find Out What You Can Afford
The most important factor in purchasing a vehicle is determining your budget. Although you may want a brand new vehicle, can you afford it? A car purchase calculator can help you figure that out. After you run the numbers, you may find that you can only afford a used vehicle rather than a new one, so that’s helpful to know before you go shopping.
Which Loan Term You Should Use
The longer you pay for a vehicle, the more affordable the payment is. Longer terms have higher interest rates, though, so the benefits may not outweigh the additional costs. Using a car purchase calculator can help you find the sweet spot between interest rates and affordable payments to best suit your needs. Remember, the quicker you can pay off a loan, the less you’ll pay in interest.
Down Payment Needed
Most people pay a down payment when purchasing a car. The usual amount is 10 percent of the car’s purchase price, but you may pay more or less. If you can’t afford a down payment at all, your payments (and often your interest rates) will be higher than if you did. The more you pay down, the lower your payments will be. Use a car purchase calculator to work out what your monthly payment will be with various down payment options.
Rebate or Special Financing
Car dealers offer many incentives these days, especially toward the end of the year when they’re trying to clear the way for new models. Which one works out better for you? Should you take the rebate, or will you save more taking the amazing interest rates offered by the dealer’s special financing program? Use a calculator to find out which option will save you more in the end or give you a more affordable monthly payment.
Which Loan to Take
When you’re shopping around for auto loans, it’s always a good idea to check out several different lenders to see what your options are regarding a loan. The interest rates you’re given may vary from one bank to another. Use the car-buying calculator with the appropriate interest rates and loan terms plugged in to see which bank or lender is offering you the better deal.
Your loan will depend on what sort of monthly payment you can afford, your down payment and your credit rating. Keep in mind that a lower monthly payment often means you’ll be paying longer on your vehicle and paying more in interest. To keep interest costs down, opt for a higher monthly payment or pay a sizable down payment.
Photo Credit: Flickr/Dave Catchpole