Calculating Your Monthly Car Loan Payment

Your car loan monthly payment will be more important than the total cost of your car. While the sticker price is the more obvious cost, it will not affect your day-to-day finances. For this reason, it is important to decide how much you can spend each month and then shop based on this measure.

Find Your Budget

Use your monthly income to determine your budget. Take 50% of the income, and then subtract fixed expenses like rent, mortgage or student loan payments. The remainder is the sum you can reasonably spend on a new debt each month. Shop by this measure when you seek a car and a car loan.

Estimate a Monthly Payment

Your dealer will likely have several loan options based on length of a loan that will change the interest rate and monthly payment. Subtract the value of your down payment, trade in and any rebates from the sticker price of the car. Factor in sales tax. Then, use your interest rate to find how much interest you will owe on each loan option, typically the rate starts at 6% for a two-year loan and goes up each year thereafter. Divide this total by the length of your loan, and you will find your estimated monthly payment.

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