How to Calculate Your Car Payment

Posted by & filed under Buying a Car with Bad Credit, Buying a Used Car, Car Buying, Financing.

how much will my car payments be

There are so many things to take into consideration when calculating your monthly car payment.  Unfortunately, it’s not as simple as dividing the sticker price of your vehicle by the number of months it will take to pay it off.  This is why determining your monthly budget is so important when car shopping, as it may ultimately determine what type of vehicle you will be able to afford.


Car Monthly Payment Calculator

Check out this breakdown of the major factors that will ultimately determine your monthly car payment:

car monthly payment calculatorPurchase Price
First and foremost, it’s important to pick a vehicle within your price range. Beyond simply considering the manufacturer suggested retail price (MSRP), take a look at the current manufacturer incentives on new models.  These can usually be located on the official manufacturer website. Additionally, many automotive dealerships will offer incentives of their own. These can be deducted from the MSRP of the vehicle and should help to shave some extra off of your monthly payments. Every little bit helps!

Value of Your Trade-In
How much is your trade really worth? To get an idea, visit Kelley Blue Book (KBB). However, keep in mind that many other factors go into ultimately determining how much you will get for your trade, beyond those listed by KBB. Determining your trade-in value early on will help you to decide how much of a down payment you still need to make in order to ensure that your monthly payments will be affordable.

Down payment
How much cash do you really need to put down on a car? This can be difficult to determine. Even if you can’t afford a hefty down payment, don’t think this means you won’t be able to afford monthly payments! The primary reason that determining how much you can afford as a down payment is so crucial is because it can affect important financing factors such as the term of your loan as well as your interest rate.

Your credit history will of course be a factor in determining the interest rate of your loan. However, it is not the only thing lenders will consider. The term of the loan will also be an important factor. The longer the length of your loan, the lower your monthly payments will be. To get the lowest possible monthly payments, consider financing for 60 or 72 months, as opposed to 24-48 months. If you’re concerned about paying more in interest, don’t worry. You can still pay off your car before that! Most financial institutions do not have a pre-payment penalty, which means that you are welcome to make larger monthly payments to reduce the amount of your loan, without any drawbacks.

Once you understand what all goes into your monthly payment, it’s much easier to determine what it will actually be. Use this free calculator to get an idea of what your monthly payments might look like.

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