How to Calculate Car Financing
To calculate vehicle financing you will need the terms and conditions relating to the loan or lease. The more facts and figures you have the easier it is to calculate all of the financing information. This will give you an idea of what your total cost to borrow money is. Once you are able to calculate your financing you will be able to determine if you want to complete the transaction or not. This information will help you make an informed decision.
Other People Are Reading
Instructions
-
-
1
Obtain a vehicle loan calculator. Many of these are available for free online, such as the one at Cars.com. Once you have all the information about the car you are financing you can key it all in to the calculator.
-
2
Obtain the following numbers from the car dealer: price of the vehicle, down payment, value of your trade-in, sales tax rate, interest rate and the number of months the loan covers.
-
-
3
Input real numbers and let the calculator do the math. If you have an automobile that costs $25,000, down payment of $1,500, trade-in value of $1,500, 7.08 percent sales tax, interest rate of 6.5 percent and financing for 48 months, your monthly payment will be $566.60. Your amount financed will be $23,625, and your total cost to own this vehicle will be $30,197. A good calculator will tell you all of these.
-
4
Enter a longer term if your payment amount is too high. You can try 60 or 72 months as the term. When you have a longer term the payments will always be lower. A term of 60 months will give you a payment of $468.69 and 72 months yields a payment of $403.69. Be aware that when the term is extended the amount of finance charges paid will increase, increasing your total cost to own the vehicle.
-
5
Enter the same information for an automobile that is going to be leased instead of purchased. The down payment will be $3,000 with no trade-in.
-
6
Obtain the money factor, which is a fraction of a percent, from your lease company. The money factor is used to calculate a lease fee, and it can be used to calculate an interest rate. If the money factor is .0031, multiply it by 2,400 to get the interest rate. In this example that would be an interest rate of 7.44 percent. A lease with a 48 month term would have payments of $419.11. The leasing company will determine a salvage value or residual value, which is the value of the car at the end of the lease. The higher the salvage value the lower your lease payments will be.
-
1
Tips & Warnings
Sometimes dealers will inflate the salvage value to make leasing look more appealing.
