This free online Automobile Finance Calculator will calculate the monthly car payment and total purchase costs you will end up paying between when you buy the vehicle and when you make the final payment.
Plus, unlike other auto finance calculators, the automobile finance calculator on this page will also calculate if and for how long you might be upside down in the car loan.
If you are upside down in a car loan, it means that at that given point in the loan repayment your automobile is worth less than you owe on it.
In other words, if you sell your vehicle at a point when you are upside down in the car loan, you would have to come up the cash to pay the difference between what the car sold for and what you still owe on the car. Otherwise the auto finance company won't clear the title so you can legally sell the automobile.
The first thing you need to be aware of when purchasing a car is that cars depreciate (drop in value) faster when they are new than when they are used (see the Car Depreciation Calculator).
For example, if you buy a new car you can expect that vehicle to drop in value by as much as 40% in the first two years of ownership (up to 20% of which occurs the moment you sign the papers!).
On the other hand, if you buy a used car that is two years old, it may only depreciate by 20% in the first two years of ownership. If you buy a used car that is ten years old, it may only depreciate by 5% in the first two years of ownership.
Now, what really gets people into trouble is when they purchase a new car with little or no down payment. This is because the moment the buyer signs the papers the new car value drops by as much as 20%, while the freshly crafted car loan balance is equal to 100% of the new car's price (or more if you wrap sales taxes and fees into the loan).
Finally, because the average person fails to budget and account for all of the costs of buying and owning an automobile (see the Car Buying Calculator), or because their income takes an unexpected drop, many people suddenly find themselves unable to afford the new car they purchased. But, because they are upside down in the car loan they can't just sell the automobile to get rid of the expenses they can't afford.
You know what happens then, don't you? Well, first the auto finance company repossesses the automobile. Second, the owner is still responsible for the difference between what the automobile is worth and the amount of their loan. And third, because their credit rating took a big hit from the repossession, the next time the consumer goes to buy an automobile they will be forced to pay a painfully high interest rate.
As usual, the buyer's loss becomes the auto finance company's gain.
Before you sign on the dotted line, visit the used car section of the dealer lot and locate a 3-5 year-old version of the new car you are considering buying. Take a good look at the car and ask yourself if you will still be happy to be making the new car monthly payment once the new car turns into the used car you are looking at. If your answer is "no," you might consider buying the used version of new car and spending some time thinking about how you might invest the thousands of dollars you will be saving (30% to 60% of the price of the new car!).
If you're still not moved to reconsider buying a new car instead of a used car, visit the local auto salvage yard and while looking out over the vast array of junked automobiles, ask yourself how many people bought those cars "new" because they thought the shiny new cars would make them happier.
Finally, if you do decide to buy a new car instead of a used, plan to own the car for at least 10 years in order to get your money's worth. And be sure to continue making your monthly car payment to yourself ("next car" savings account) once the car is paid off. That way you may be able to pay cash for your next car and save yourself thousands of dollars in interest charges.
With that, let's use the Automobile Finance Calculator to calculate the monthly car payment and total cost of buying and financing a car.
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Negotiated automobile price: The final purchase price of the vehicle you are considering buying. Be sure to include the price of all added options.
Sales tax rate: The total of all applicable sales tax rates (state, local, etc.) Enter as a percentage (for .07, enter 7%). Check the box if you would like the sales tax included in the amount to be financed (not recommended).
Title, transfer, etc.: The total of all other upfront fees that will be due at signing (title, transfer, loan fees, license, etc.). Check the box if you would like the upfront fees included in the amount to be financed (not recommended).
Trade-in allowance: The amount the dealer will be taking off the price of the automobile in exchange for trading in your previously owned vehicle. If no trade-in will occur, either leave blank or enter a zero.
Down payment: The amount of your down payment. The more you can pay down on the automobile the less you have to pay in finance charges, and the less likely you will find yourself upside down in the car loan (car is worth less than you owe on it). If no down payment will be made, either leave blank or enter a zero.
Number of payments: The number of monthly payments you plan to make before the automobile loan is paid off.
Interest rate percentage: The annual interest rate of the automobile loan. Enter as a percentage (for .07, enter 7%).
Amortization schedule: This is the breakdown of each periodic payment made to repay the amount borrowed. Each line of the amortization schedule shows the total amount paid for the period, along with the portion that went to pay down the principal and the amount that was used to pay the current period interest charges. The last column is usually the new balance owed following that period's payment (previous balance minus principal portion of current payment). The automobile finance calculator adds a new column that displays an estimate of the car's value. Values that appear in red indicate you may be upside down in the car loan for those payment periods. The automobile finance calculator also allows you to choose whether or not you want the results to include a monthly amortization, an annual amortization, or no amortization schedule at all.
Car price: This is the final purchase price of the car as entered in the top portion of the automobile finance calculator.
Sales tax: Based on the entered price, down payment, and sales tax rate, this is the total amount of the sales tax that will be due at signing. The note in the parenthesis will indicate whether or not the sales tax is included the amount to be financed.
Title, transfer, etc.: This is the total of the upfront fees as entered in the top of the automobile finance calculator. The note in the parenthesis will indicate whether or not the fees are included the amount to be financed.
Trade-in allowance: This is the trade-in allowance as entered in the top section of the automobile finance calculator. The trade-in allowance is deducted from the purchase price when figuring the amount to be financed.
Down payment: This is the down payment as entered in the top section of the automobile finance calculator. The down payment is deducted from the purchase price when figuring the amount to be financed.
Total amount to finance: This is the total price plus any included upfront taxes and/or fees, minus any trade-in allowance and/or down payment.
Total interest cost: Based on the amount to be financed, the interest rate, and the number of payments, this is how much interest you will end up paying by the time you make your final payment.
Total of principal and interest payments: This is the total of all of your monthly payments (principal and interest).
Total purchase costs: This is your total cost to purchase the automobile, which includes the price, interest cost, sales tax, and upfront fees.
Cash needed at signing: This is the total of your down payment and any upfront taxes and/or fees you chose not to include in the amount to be financed.
Monthly payment: Based on the amount to be financed, the interest rate, and the number of payments, this is how much your monthly car payment will be.