Auto Loan Calculator (How to Estimate What Your New Car Payment Will Be)

Shopping for a new car is exciting. However, it also involves a lot of financial planning, especially if you plan on using financing to help pay for your new car. Fortunately, you can estimate your car payment before you take out a car loan to prepare for potential monthly payments using a calculator. Read on to see what factors impact your car payment, and tips for managing your car payments.

If you don’t have enough cash to pay for the entire cost of a car upfront, a car loan could help you out, regardless of whether the vehicle is new or used. When you take out a car loan, you receive money to buy a new car. Then, you pay back the funds over a set term plus any interest or fees that the lender charges.

Car payments refer to the monthly amount you owe to repay your loan.¹ They’re made up of the principal (the money you borrow), interest (the price you pay to borrow money), and fees. Once you look at your budget or create one, you’ll have a better idea of what car payments you can afford each month.

It’s important to note that there are three main factors that typically impact your car payment: car loan amount, the interest rate, and the loan term.

• Car loan amount
  The car loan amount, of course, is a significant factor that will impact what your monthly payments will be. The amount that you’ll end up borrowing will also be impacted by whether you have a car that you’re trading in, the purchase price of the vehicle, and whether you owe money on your current vehicle.
  
  
• Interest rate
  The interest rate will also impact your monthly payments. Having a higher interest rate can also add to the cost of your loan over time. Typically, auto loan interest rates are determined by factors including your credit, income, current debts, the loan amount, and the term of the loan.
  
  
• Loan term
  The duration of the loan can also impact your new car payment. Having a shorter duration could result in higher monthly payments, but you’ll be paying the loan balance off sooner. A loan with a longer duration could lower your monthly payments, but may extend the amount of time that you’ll be paying off the loan, resulting in additional interest over time as well.

To calculate your new car payments, you’ll need to know the following:²

• Purchase Price: This is the price you agree to pay for a car. It may be the sticker price or a bit lower if you can negotiate or land a good deal.
• Sales Tax: Sales tax is usually determined by your state and locality.
• Fees: In most cases, you will have to pay fees when buying a car, such as title and documentation fees.
• Down Payment: The down payment, which will reduce the overall cost of your loan, is the amount of money you pay upfront for your vehicle.
• Trade-in Value: The trade-in value refers to the offer you receive on your existing car that you can apply as a credit toward your new vehicle, if applicable.
• Interest Rate: The interest rate is the amount your lender will charge you to borrow from them and is based on factors like your credit and income.
• Loan Term: Loan term is how long you have to repay your car loan. Typically, these are offered in 12-month intervals such as 24, 36, 48, 60, 72, and 84 months.³

To calculate your car payment, subtract your down payment and trade-in value from the purchase price of your new or used vehicle. Then, add taxes, fees, and interest. Lastly, divide by your loan term.

If you do decide to take out a car loan, these tips could help you manage your car payments.

1. Check that your payment will fall within your budget
   Before committing to a car payment, make sure it aligns with your budget. You should be able to comfortably cover your car payment as well as other expenses, like your bills and groceries.
   
   Don’t forget to account for the additional costs of driving a car like gas, insurance, and maintenance. One guideline states that your car payment to be no more than 10% to 15% of your monthly take-home pay,⁴ though you should only accept a car loan if you can comfortably pay the monthly balance.
   
   
2. Set up autopay
   Most lenders will allow you to sign up for autopay so they can automatically deduct your car payment from your bank account each month. Some lenders might even reward you with a discount for doing so.
   
   By taking advantage of autopay, you don’t have to worry about missed or late payments. All you need to do is reach out to your lender, provide your bank account information, and make sure you have sufficient funds in your account on the payment date.
   
   
3. Work toward early repayment
   If you repay your car before the term ends, you’ll own it free and clear sooner. Another huge perk is that you’ll pay less in total interest charges. Depending on your situation, early repayment could lead to a significant savings. If possible, it’s a good idea to make extra payments on your car loan or apply a bonus or tax refund to the principal.