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Before shopping for your next car, it’s an important part of the car buying process to prepare for what the cost may look like. If you’re shopping for a new or used car, you may be looking to project your monthly payments before making it official. You can use a car payment calculator to estimate your monthly car payments and ensure it fits in your budget before visiting your local dealership.
How does a monthly car payment calculator work?
A monthly car payment calculator takes your loan details and turns them into projected monthly payments. Your monthly payment will be determined by the vehicle cost, loan term and APR (annual percentage rate) — which is highly dependent on your credit score. The APR for used cars is often higher than for newer cars, as well. Once you’ve entered these details into the calculator, it’ll automatically provide your estimated total monthly payment based on your loan’s term, APR, and loan amount. The result may also show the total amount of payments and total interest to be paid over the life of the loan.
Common car payment terms to know
As you shop for a car and anticipate your loan costs, the following are some helpful car payment terms to know:
- Lender: the institution that provides the financing.
- Principal: the amount you’ve borrowed.
- Interest: the amount your lender charges for borrowing money.
- APR: the measure of the cost of credit, expressed as a yearly rate, according to the Federal Reserve. APR stands for annual percentage rate.
- Maturity date or term: the length of financing and when it’s expected to be paid back in full.
- Title: the document indicating who legally owns the vehicle.
The bottom line
Calculating your monthly car payment with a car payment calculator can help you understand what you will be paying month to month as well as over the lifetime of your loan. That way you’ll be better able to estimate how much you can afford while shopping for the right car for you. So, if you haven’t already, try it out!