Compare Auto Loan Rates
With this calculator, you can see a detailed cost comparison of five different loan term and interest rate combinations. First enter the total amount you plan to borrow to finance a desired vehicle purchase. Then, for five different loan term options, input the interest rates attached to those loan terms.
When you press CALCULATE, you’ll quickly see how different loan terms can alter monthly payments, the total principal and interest on your loan, and the total number of payments you’ll need to make.
What Impacts Your Borrowing Rates?
Owning and operating a personal vehicle is a privilege and a convenience, one that we often take for granted in this consumer society of instant gratification. We've somehow come to believe that we're entitled to certain things, such as a high-paying job, a house, and a car, just for example. But these are things that we earn - they're not handed out like candy. And you need to plan ahead, save money, and get your credit in order if you want the opportunity to borrow the funds needed to put you behind the wheel of a decent mode of transportation.
In case you didn't know, there are dozens of factors that could have an impact on the interest you're charged when you seek an advance of funds from a lender. Borrowing money isn't easy at the best of times, so if you're in dire straits with your bills and your driving record is a shambles of moving violations and parking tickets, you could be in for a big surprise when you try to borrow money to buy a car. However, when you understand some of the major factors that can affect interest rates, you can do a lot to further your cause and save some money. Here are some considerations to keep in mind before you try to buy the car of your dreams.
Current interest rates
Regardless of how well you get your ducks in a row before you approach lenders, you can't do much to negotiate beyond the current prime rate. This number is set by individual banks and could vary from one to another, so it's not a bad idea to shop around when you're looking for funding to buy a new car. That said, the prime rate of any given bank is generally based on the federal funds rate (the amount banks charge each other for short-term lending), so it probably won't differ significantly from one lender to the next.
This is a biggie. If you have a black mark on your credit, it could certainly have a negative impact on your ability to secure a fair deal, or secure lending at all. Luckily, you can find out early about such issues by ordering a free credit report from AnnualCreditReport.com. This will give you the opportunity to set things straight before you buy. If, on the other hand, your credit is stellar, you can use it to your advantage to get the best possible deal.
Technically, this falls under your credit, but you might not realize that having other outstanding debts can impact your ability to borrow further funds or affect the amount you are charged in interest to do so. However, lenders will almost certainly look into your income-to-expense ratio, or how much you earn versus how much you owe, when determining the amount of interest to charge for the sum you're attempting to borrow.
Obviously, you're going to want to be employed at the time you try to borrow funds to purchase a new car, not to mention after the fact if you want to make your payments. What lenders will also be interested in, however, is the amount of time you've been gainfully employed with the same company. If you've recently had a long stint in the unemployment line and you've only recently rejoined the workforce, you could have some difficulty securing a good deal where interest is concerned.
As mentioned before, the amount you are charged in interest when you borrow funds could be directly related to the lender you choose. After all, they set their own standards. That said, you need to look into all kinds of lending, whether you finance through the dealership, you approach several banks, or you go with your credit union. Keep in mind that everyone wants your business, so you shouldn't be afraid to use one low offer to negotiate a better deal with your preferred lender.
The amount of the loan
There is a lot to weigh out when it comes to securing funding for your vehicle purchase. However, once you get past the credit check and scrutiny of your employment history, it's time to get down to the nitty-gritty of why you want to borrow money in the first place. And the amount of money you're looking to arrange for could definitely have an effect on the terms of your arrangement, including the interest. The more you seek to secure, the more you potentially stand to get charged in interest, especially if the lender feels there is higher risk involved with the transaction.
You might not realize that the length of your arrangement with a lender could make a difference in how much you pay. Obviously, you'll make more interest payments with a longer arrangement. But you might also end up paying a higher percentage in interest when you opt for a five or six year contract for repayment. On the other hand, switching to a shorter-term deal could leave you dealing with higher monthly payments but enjoying lower interest for the duration. And in the long run, this could save you some serious dough.
Your down payment or trade-in
The more money you are able to come up with initially, the less you'll pay overall when it comes to purchasing a vehicle. But if you are able to arrange for several thousand dollars down or on trade-in, you might also lower the amount you're asked to pay in interest on the loan. The less you owe, the less risky you are to lend money to, so you’ll get better options where your lending agreement is concerned. This can lower your monthly payment, as well as what you end up paying in total by the time you have the pink slip in hand.
Naturally, the car you plan to purchase can have a marked effect on the terms of your lending arrangement. And this not only revolves around the sticker price of the vehicle, but it could also be related to the class of car you're buying. Sports cars and convertibles, for example, tend to be higher risk vehicles, and if you get into an accident and total your new car, the lender could wind up footing the bill if you're unable to pay the remaining balance on the contract. Any time the lender assumes more risk, you can assume that higher interest is in the cards as a trade-off.
Believe it or not, simply opting to go paperless and allowing the money for your loan payments to be automatically withdrawn from your account each month could net you a slight decrease in interest charges. Everyone is looking to go digital these days, and lenders are no exception. Plus, guaranteeing that they'll get their monthly payments without having to send out paperwork or wait for your payment to come in is extremely valuable, and most lenders are willing to compensate you for your generosity by lowering your interest charges by a small margin (usually less than one percent, but it can definitely add up over time). There's a lot you can do to affect the ultimate interest your lender settles on for your car purchase. And knowing your options can definitely help you hedge your bets and secure the most advantageous arrangement possible.