Trying to figure out how much you can afford when buying a vehicle? It can be a bit confusing when trying to figure in tax, tag and title fees as well as your down payment, annual percentage rate (APR), and trade in value on your old car. Before you blow a fuse trying to calculate your monthly payment, and trying not to get ripped off, try something else instead; let the Internet do it for you.
STEP 1: Research Your Trade-In Value:
Many dealers will give you an estimate, but it is usually a bit lower than it should be. This is because they want to make maximum profit when they re-sell your car. So, doing a bit of research can help this be avoided, and also bring your monthly payment down.
Use web sites such as www.kbb.com (Kelly Blue Book) to find out the exact blue book value of your car. This process will determine its worth by entering what type of vehicle you have, what features it has, as well as its condition and history.
Finding out what your car is worth can help you determine how much your loan will be for your new vehicle, and therefore find out how much your monthly payment will be. *
Another advantage to your trade-in is that most states do not tax your trade-in value. You only pay tax on the actual difference between the new vehicle and the trade-in.
STEP 2: Research The Price of Your New Vehicle:
The next step is to find out how much that vehicle you have been eyeing actually is. Shop around online and call dealers if you like to find the approximate price you will pay for that vehicle. Go with the average price as it is likely the most accurate.
Step 3: Research Fixed APR’s:
This is a crucial step, as your annual percentage rate will determine your monthly payment. Look for the lowest APR you can find, and be sure that it is with a legitimate company, and has a fixed APR, meaning the APR cannot be raised. This will ensure that the loan agency does not raise your APR without your knowledge making your monthly payments rise higher and higher.
STEP 4: Determine Your Down Payment:
Down payments can greatly reduce your monthly payment. So you need to determine how much of a down payment you can afford, without depleting all of your savings. Even if your down payment is just a few hundred dollars, you will save on the interest you would have to pay on the loan for that amount. So it is definitely something you need to think about.
STEP 5: Calculate Your Monthly Payment:
Go to the following URL for Edmunds.com. This “Auto Loan Calculator” takes all of the information you have been researching and turns it into reality. For instance, say your research turns out these results: *
Trade-In Value of your old car: $7,000 Price of your New car: $19,599 Fixed APR: 5.5%
How many months financed: 60 months Down Payment: $1,500
Your Calculated Monthly Payment is: Approximately $243.82 (Depends also on the sales tax of your state)
http://www.edmunds.com/calculators/auto_loan_calculator_index.html
This will get you a starting point on how much you can afford to pay each month. Being well informed can prevent any financial problems down the road.
*How much your trade-in is worth is not the only factor. If you still owe money on your current vehicle, you will need to figure that in as well. *This is only an example and not to be used for any other purpose than exactly that.