There are many people who want to buy a new car, but probably don’t know if the car is within their capabilities. Before you act impulsively or be tempted, consider all the financial information. Although the suggestion of monthly payments is a good option to start your analysis, you should also consider the financial cost (interest) you pay during the loan period. The interest is the real cost for the money you lend for the duration of the loan.
Calculate the monthly payment of a car loan
Interest rates vary according to many factors, such as your credit history, the borrower institution, the promotions that may exist, or the size of the total payment.
It’s important that you know your own credit history, as a borrower uses it to determine the interest rate. You can request your history from institutions such as the credit bureau for free once a year (depending on the country).
The terms of the loans vary between 1 and 6 years. The borrower must determine the term of the loan and you decide whether to take it or not.
You will pay lower interest rates on the loan if the term is shorter, but you will need to make larger monthly payments.
The final loan amount is the purchase price less the value of the advance (installment) if it exists.
Some calculators require the number of months or the number of years to give you the monthly payment. Give yourself the task to confirm the type of term that the website should accurately determine the monthly payment for the car loan.
For example, the monthly payment of a loan per vehicle of 255,000 with an interest rate of 6 percent and the loan term is 4 years (48 months) will be 5,988,70.
Calculate the interest on a loan for a car.
The total cost of the car is equal to the monthly payment multiplied by the number of payments while the loan lasts. If you make a monthly payment of 5,988.70 and a 48-month term, the total cost is equal to $ 287,457.60.
If the purchase price was $ 255,000 and the total cost of the car was $ 287,457.60, then the difference would be the interest paid on the loan. That’s $ 32,457.60.