Car Buying Tip - Monthly car payment estimator

(NOTE: Click on the table to enlarge the image or download the spreadsheet by following this link)

Here is a table and spreadsheet I put together to show you how much your monthly payment is for various terms and amounts borrowed. The interest rate for the table is 6%. If you download the car loan payment spreadsheet, you can vary the interest rate and see the effect on payment over various terms and amounts borrowed. (NOTE: This is for illustration purposes and uses simple compounding rather than the more complicated compounding banks use these days.)

There are two main points I am trying to illustrate:
1. New cars are very expensive. Let's say you buy a new car for say, $25,000. and put down $2,500, you are going to end up with a car payment of $684/month for three years or $528/month for four years or $435/month for five years. In light of this monthly expense you may want to consider purchasing a newer used car. There are great values in used cars today.

2. Don't be a "monthly payment" shopper. Car dealers love monthly payment shoppers because they are focused on the payment, not the interest rate or the length (number of payments) of the loan. If you belong to a credit union, you should talk to them about a car loan BEFORE you visit a dealer. Most credit unions offer very competitive interest rates.

Finally - consider the length of the contract. Just one more year (12 payments) on a loan dramatically changes the overall amount your are paying. For example, one more year of payments at $400 is $4,800.



Tags Car - Selling - Buying - Shopping - Tip