Calculating car loans may seem like its own science. Whether you are a first-time car buyer or a long-time driver, it helps to understand how a car loan is calculated or how car payments work. Before you head to the dealership, please take a moment to decide what monthly car payment you can afford. First, you need to consider your budget. Most importantly, look at your situation and be realistic and honest. Car payments and the auto loan you receive should be affordable and doable.
How Are Car Loans Calculated?
A financial institution considers the value of the vehicle, how long you want to borrow money for, your credit score, and other factors. The best way to estimate what your monthly payment might be is to check your credit and then use a car payment calculator. However, you won’t know exactly what rate and loan amount you qualify for until you apply for a car loan.
Approximately, the average price of a vehicle is $25,000 to $35,000. Very few people can afford to pay cash. If you are like the majority, you will need to request a car loan.
How Do Car Loan Payments Work?
Having a car payment means your car is owned by a financial institution until you pay off the loan. When you borrow and take out an auto loan, you have agreed to pay back the amount you borrowed plus the interest (Annual Percentage Rate, APR, or rate) within a time frame (term).
Calculating Car Loans | Total Loan vs. Car Payment
Auto loans are pretty simple once you break them down. Pearl Hawaii pays the dealer a lump sum for the car. Technically, Pearl Hawaii Federal Credit Union owns the vehicle until the loan is repaid. Once the loan is paid in full, you would have paid for the car (the principal) and interest (Annual Percentage Rate, APR, Rate). Interest is what you pay to borrow the money.
While considering this, sometimes your monthly car payment may be more important than the total cost of the car. With our car payment calculators, you can quickly determine how much you will owe and what you can afford. A car payment has to fit in your monthly budget and your lifestyle’s needs.
Additionally, information from our car payment calculators is for example purposes. Our interactive calculators are educational tools. We cannot and do not guarantee their accuracy in regard to your individual circumstances. While a calculator can be a useful tool, all examples are hypothetical and are for educational purposes. We encourage you to meet with a Pearl Hawaii Federal Credit Union loan officer for accurate car payment information.
What’s In A Monthly Car Payment?
Your monthly car loan payments depend on the loan amount, which is based on the sale price of the car, minus a down payment or trade-in credit. Additionally, a car payment is calculated based on the rate. Essentially, the loan includes the interest rate that is based on the borrower’s credit score and the cost of the vehicle. Additionally, some people take out a longer loan to get a more affordable car payment. On average, the term of a car loan is 36 months for used cars and 60 months for new cars.
How Much Is A Car Loan and Payment Usually?
The average monthly payment for a new car is $563* and used cars have the lowest average monthly payments at $397*. In general, if your credit needs a little work, your car payment may be a little higher. The average loan amount for new cars is $34,635*. For used vehicles, $21,438*. *Experian
Get Help With Calculating Car Loans: Car Payment Calculators
NEED HELP CALCULATING YOUR NEXT CAR LOAN?
If you need to borrow money, we can help you. If you’re still not sure whether a loan is a right option for you, call us at 808.73.PHFCU (737.4328) or visit one of our locations on Oahu (Waipio, Waianae, Ewa Beach, Honolulu, Airport, and Pearl Harbor). Our team is ready to look at your financial situation and recommend the best option for you. You can also apply online to get started…