Let’s face it – most of us are more likely to finance a car than pay cash outright. Why? Because few of us can spare tens of thousands of dollars all at once. Saving up for a cash payment could work, but few of us possess the patience. Leasing is affordable too, but it does not allow real vehicle ownership. This leaves financing as the only viable way of actually owning a vehicle. However, if you’re frightened of taking that first step to finance a car, you can easily alleviate your fears by calculating your potential monthly car loan payment to find out exactly what you can afford.
One of the easiest ways to do so is by using an online calculator that does all the math for you, such as Unhaggle’s Auto Loan Finance Calculator. Just enter your pre-tax vehicle price, down payment, interest rate, sales tax, term as well as start date, and you should be good to go. If you traded in an older vehicle, you can also enter your trade-in amount and owed-on trade. No matter how you approach this, it’s easy.
But, if you insist on making the calculation manually, you can do so as well, but it will be harder. First, you need to write down your interest rate, amount of loan and the amount of monthly payments. After that, convert your interest rate to a decimal. For instance, if your interest rate is 5.5%, your decimal would be 0.055. Once that’s accomplished, divide your decimal by twelve months. Then, multiply the resulting value by the amount of your loan or purchase price of the car. If your interest rate is 8% and you are financing for $15,000, then your result should be 99.99.
The next step is a little more complicated. If your interest rate is 8%, then its decimal value would be 0.08. Divide it by twelve to get 0.0067, and then add one to get 1.0067. Next, raise the amount to the negative power, which is the amount of months your loan will last, using this formula: (1 + 0.08 / 12) ^-60). Take one and then subtract the resulting number from it like this: (1 – 0.671). You should get 0.329.
By this point you should have two values: 99.99 and 0.329. Divide 99.99 by 0.329, which will equal to 303.92. This would be your monthly payment.
For information on car pricing and more, please consult Unhaggle’s free dealer cost report.