Auto Loan Calculator
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This auto loan calculator takes into account the principal, the interest rate and payments, the loan term, the down payment, the trade in value and the fees, as described above. You will borrow the full price of the car, along with fees, for a given period of time, and pay monthly interest on the sum along with part of the principal. The auto loan calculator shows the total interest paid and the total cost of the loan. You have the option of deducting the fees from the calculation if you prefer to pay them upfront.
Typical Fees for Auto Purchase
When purchasing a vehicle, the buyer should be prepared to pay the costs other than the vehicle prices. These costs may be included in the loan to avoid hefty upfront payment. The following is a list of the common fees in the United States. Should the auto dealer ask for any other special charges you should demand justification for them.
- Sales Tax—Most states in the United States collect sales tax for auto purchase.
- Document Fees—This is a fee collected by the dealer for processing documents like title and registration. Typically, it should be between $150 and $300.
- Title and Registration Fees—This is the fee collected by states for vehicle title and registration. Dealer will handle the paper work. Most states charges less than $300 for title and registration.
- Advertising Fees—It's a fee that the regional dealer pays for promoting the manufacturer's automobile in the dealer's area. If not charged separately, the Advertising Fees are included in the auto price. Typical price tag for this fee is a few hundred dollars.
- Destination Fee—This is a fee that covers the shipment of the vehicle from the plant to the dealer's office. Typically, this fee is between $600 and $1,000.
- Insurance—In the United State, insurance are required before you can drive on the public road. The auto dealer will require you to have insurance before they can process the paper works. If you purchased auto via loan, you are required to purchase a full coverage of the vehicle. The insurance typically costs more than $1,000 a year for a full coverage. Most auto dealers can provide short-term (1 or 2 months) insurance for paper work processing so that you can deal with the insurance later.
Sales Tax on Trade-in Value and Cash Rebates
Within the states that collect sales taxes on auto purchase, a small amount of states collect tax based on the full price of the car. Most states collect sales tax based on the difference between the new car and trade-in price, if applicable. The states that collect tax based on the full price are:
- District of Columbia
So, if the sales tax rate is 10%, the new vehicle price is $25,000, and the trade-in value is $5,000. In California, the sales tax is $25,000×10%=$2,500. In New York, the sales tax is $20,000×10%=$2,000.
Likewise, many states tax cash rebates. These states view the cash rebates to be payment from the auto manufacturers, which do not affect the auto purchase price. For example, if you purchase a vehicle at $30,000 with cash rebate of $2,000, sales tax is calculated based on $30,000 instead of $28,000. Luckily, many states do not tax cash rebates, these states are Alaska, Arizona, Delaware, Iowa, Kansas, Kentucky, Louisiana, Massachusetts, Minnesota, Missouri, Montana, Nebraska, New Hampshire, Oklahoma, Oregon, Pennsylvania, Rhode Island, Texas, Utah, Vermont, and Wyoming.
Auto Loan and Auto Leasing
An auto loan is a secured loan that carries interest. What this means is that you borrow money from a lender, and that, if you don't pay it back, the lender will repossess the car. The lender does business with you because there is a profit to be earned on the transaction in the form of interest. Each month you will repay a portion of the principal you have borrowed, and a certain amount in interest. In the end, you will pay back more than you borrowed. There are also charges and taxes to be paid when you purchase a car with financing.
Different lenders will offer you varying rates of interest. Your ability to negotiate with lenders depends heavily on your credit score. You should know what your credit score is before you apply for a car loan. For a small fee, you can get it through the various credit agencies: FICO, Equifax, Experian and TransUnion. If you have a low credit score, you should seek ways of improving it before seeking a loan.
Your car dealer will offer you financing for the auto you wish to buy. This is, however, not necessarily the best option for your auto loan. Many car dealers offer low rates of interest, but they offer them over long periods of time, so that you wind up paying much more for the loan. Sometimes, the auto maker or dealer will provide Incentives for the purchase of a certain model of vehicle in the form of low interest rate loan or rebate. Always compare this option to the other ones available to you..
There are many other places to obtain a car loan: Banks, private financing, loan companies, and now it's even possible to get P2P financing for your car loan. Shop around, search the Web, and try out all the options.
It is definitely to your advantage to obtain pre-approved financing first before talking to the car dealer. This will give you much more leverage in negotiating for the price of the car. Try to get your bank or loan company to make the loan for a pre-approved amount.
Leasing offers a different approach to buying a car, because you aren't really buying one. You are paying for the accounting value of the car over a certain period – this is called its depreciation value – and not for the sales price of the car, when you lease it. You do still have to pay interest, tax and fees.
Leasing is a good choice when you do not want to make a large upfront payment for a car. You can pay as little as no down payment at all, or make a substantial down payment, but it will always be less than what you would pay for buying a new car. The less you pay upfront, however, the more you will have to pay per month in lease payments.
Most leases last three years. This is for insurance reasons as the cars are covered by bumper-to-bumper warranties during that time. You do have to pay regular maintenance on the car, for ordinary repairs like changing the oil, keeping the tires in repair, etc. There are also mileage restrictions on most leases.
If you decide to keep the car at the end of the lease, sometimes you can get financing to pay the balance.
When is leasing not for you? If you really want to own your car, and to be able to do as you like with it, then leasing is not a good choice. The car never becomes your property while you lease it, and so you're really just renting, not owning property. You have nothing to sell at the end of the lease. This is an important financial consideration.