![]() If you want to know what is the total cost of your loan, multiply your monthly payment by the number of months you will pay your loan and then subtract the total amount of the loan from that value: It is your monthly payment in the loan from our example. Use the appropriate formula to compute the monthly payments: It is the value of a new car minus the money you get from selling an old car and money you can withdraw from your bank account: It is the trade-in value minus tax:Ĭalculate the amount of money you need to borrow. To calculate the monthly payments, we need to stick to the following steps:Įstimate the amount of money you will get for your old car. ![]() The sales tax in your state is 10%, and the interest rate on the car loan is 4%. You also have a car – an old Chevrolet Silverado worth about $7,000, and $1,500 in your savings account. Now we know the formula used in the car loan payment, we can try to perform a sample calculation.įirstly, let's assume that you want to buy a five-year-old Jeep Wrangler worth $20,000. Usually, it is more profitable to buy a new car with dealership financing, as it is significantly cheaper – interest rates in such loans can be as low as 0.5%, 1%, or 1.5%. Note that to promote sales, car manufacturers offer attractive financing opportunities via dealers. In dealership financing, you usually cannot choose the lending institution – usually, the loan is granted by so-called captive lenders associated with a car manufacturer.
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