Buying A Car? Use These Auto Loan Calculators First


Unless you live in a big city with lots of mass transit options, cars are essential. Aside from your home, if you own one, your car is likely the most expensive asset you have. But how much car can you afford?

Auto loan calculators are great for answering this question.


Know your numbers before you go to the dealership

Remember that a car dealership’s goal is to sell you a car and make a profit. Some salesmen go about this the right way and some . . . don’t.

Auto loan calculators can help make sure you don’t get pressured into a poor decision.

This auto loan calculator from is straightforward and easy to use. You just plug in the relevant details (sales price, down payment, interest rate, etc.) and it will spit out your monthly payment right there on the page. This auto loan calculator also tells you how much total interest you’ll pay over the life of the loan.

You need to know how much you’re comfortable paying each month before you go into the dealership. Sit down and really analyze your finances (these financial calculators can be super helpful in assessing your financial health). Once you decide on a maximum monthly payment, don’t waiver.

If you fall in love with a car that will put you above this well-planned, rationally chosen monthly limit? Sorry, choose a different car.

This auto calculator from Edmunds actually uses the information you enter (loan preferences, down payment, trade-in value, etc.) to give you a suitable price range of vehicles to consider. Of course, an auto loan calculator is only as good as the data you give it, so be realistic.

Still – I think this can be a very helpful tool when you’re in the planning stages of the car buying process.  

auto loan calculators

Auto loan calculators can help you see the impact of interest rates and term length

Sometimes a car salesman will ask you what you’re willing or able to pay each month. (Little car-buying tip: don’t tell them that.). That’s not necessarily the most important question when you’re buying a car.

After all, you should also care how much you’re going to pay in total for the vehicle.

A potential danger with auto loans is that you can find yourself with a term length that’s too long. Sure, you may be able to afford the monthly payments, but you may end up paying for that vehicle longer than the car actually works! That’s a recipe for a financial disaster.

Many auto loan calculators (like this one from Bankrate) only let you choose a maximum term length of 60 months (5 years). That’s because most financial experts agree that if you can’t pay off the car within five years, the loan isn’t a smart financial move.

However, many banks will lend you the money for longer. My bank, for example, offers an auto loan with a term of eight years for new vehicles!

Auto loan calculators will help you see the total cost of a vehicle by the time you’ve paid off the loan.

Let’s say you buy a $25,000 car and you put down $10,000. At a 3% interest rate for five years, you’ll end up paying an extra $1,000 in interest. If you don’t have any money to put down, you’ll end up paying nearly double that amount in interest.

But what if you financed that $25,000 car, with no down payment, for eight years? You’d pay more than $3000 in interest. Not good.

For this reason, I really like the auto loan calculator from

It doesn’t restrict you to pre-defined options, so you can enter any specific term length for your proposed loan. It also gives you the option of including sales tax and/or any additional fees in the loan. This will give you a more accurate sense of your total costs (and therefore, monthly payment.)

Using these loan calculators can prevent you from being distracted by the lure of a pretty, shiny new car.

There’s nothing quite like that new car smell. If you’re at a car dealership, it’s easy to fall in love with all the beautiful choices presented.

Using an auto loan calculator to do the financial work before you go car shopping will help ensure you select the perfect new car you can also afford!


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