Doing research empowers you to make decisions in your best interest.  Obtaining a car payment estimate helps you determine how much car you can afford.

Estimate Car Payment

Some consumers may wonder why they should get a car payment estimate.  After all, all they need to do is go to the dealership or bank and an associate can figure everything out.  The truth is that it’s your money and you should be the one in control.  Doing research empowers you to make decisions in your best interest.  Obtaining a car payment estimate helps you determine how much car you can afford. 


Financing Options

The majority of people finance their new vehicle through the dealership.  There are positive and negative aspects to this method.  On the positive side, it may be more convenient for you to let the dealership take care of all the paperwork and all you have to do is sign.   The process may be faster and, at times, you may receive a competitive rate.  On the other hand, you need to be prepared to deal with pressured upsells.  Most of the amount of your monthly payment in the beginning will go toward the interest instead of the principle.

A second option for auto financing is through a bank.  This option’s positive aspects are that you receive competitive rates, no upsells, personalized service, and the fact that a bank won’t finance an overpriced car.  In addition, banks frequently provide life or disability insurance at no additional cost.  The interest is generally distributed equally throughout the life of the loan.  On the flip side, you have to take care of matters during business hours and it is not as convenient as going through the dealership.

A third financing option is to draw equity from your home.  This option would make some of the interest tax deductible and you would receive competitive rates.  In contrast, it involves risk, as your home is now on the line.  If anything goes wrong and you can’t make the payments, it could result in the loss of your home. 
Moreover, a fourth method of financing a vehicle could be through a family member or friend.  Although this option may eliminate some inconveniences, often, relationships are affected.  Anyone going this route should put all the specific details in a contract.  A contract protects the lender as well as the borrower.  People tend to forget details.  A contract would take care of any misunderstandings if any should arise later on.


How the Rate is Determined

Most people have seen advertisements on T.V. for loans where they’ll mention a low rate.  The rate is normally preceded by the phrase, “as low as.”  This means that some consumers may qualify for that particular rate, but it’s not necessarily what you will receive.  Other ads will use the phrase, “with approved credit.”  This means that your credit rating plays a major role in determining your rate. 
The length of the loan is another factor that influences your rate.  Longer terms equal higher rates.  Often, consumers will focus on the monthly payment and overlook the length of the loan.  Although your monthly payment may be more affordable, the longer you extend the payments, the more you’ll pay for your vehicle.  Other determining factors may be the year of the car and your geographic location.


Estimating the Car Payment

Various factors influence the car payment.  Some of these factors are the loan amount, interest rate, and length of the loan.  You also need to consider tax, title, and tag fees when you estimate the car payment.  Other influencing factors are the interest rate and the down payment amount. 

You can use an online calculator to obtain a car payment estimate.  One reputable website you can go to is carmax.com®.  You can use their online calculator.  All you need to do is fill in the fields and you’ll receive an estimate within minutes or even sooner.

Cars.com also makes a financial calculator available to consumers to estimate car payments.  This site provides four calculators. One helps you decide how much car you can actually afford.  Another calculator is designed to help you compare purchasing a car versus leasing one.

Take advantage of online resources such as these sites to make an informed decision before sitting down at the dealership or the bank.  It’s important to have a good idea of how much you can afford to pay monthly to avoid stress in your life.  Although the monthly payment is not the only thing that matters, if you multiply the monthly payment times the number of payments you’ll be making, you will get the total amount that you will pay for your car.  The last amount is important to determine whether the vehicle you’re buying is worth paying that much.
In conclusion, understanding the pros and cons of each auto finance method is advantageous to your purchase.  Equally important are the factors that influence the rate since the rate is a major determining factor in your monthly payment.  Finally, a car payment estimate will help you determine ahead of time how much car you can afford.  Online resources can help you in this area.  Applying these suggestions will help you purchase a car that you can enjoy and make your life as stress free as possible.

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