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Instantly calculate true car loan costs. Factor in down payments, trade-in values, taxes, and dealer fees to reveal your exact monthly payment. This free online tool allows you to calculate auto loans quickly and accurately. No sign-up or installation required.
For most consumers, buying a car is the second largest financial transaction of their lives. However, unlike a house which generally appreciates in value, an automobile is a rapidly depreciating asset. The moment you drive a new car off the dealership lot, its value plummets by roughly 10% to 15%.
Because you are taking out a long-term loan (with interest) to purchase an asset that is constantly losing its value, auto loans carry a unique, inherent financial risk known as being "Underwater." By using our calculator, you can structure your loan safely to avoid this catastrophic financial trap.
Also known as "negative equity," being underwater on a car loan means that you currently owe the bank more money than the car is actually worth.
If you owe $20,000 on your loan, but the car is only worth $15,000, you are trapped. If you get into a major accident and total the car, your insurance will only pay the $15,000 market value. You are now legally forced to pay the bank the remaining $5,000 out of your own pocket for a car that no longer exists.
There are two proven ways to prevent being underwater. First, put down a massive Down Payment (at least 20%) to create instant equity. Second, do not take out 72-month or 84-month loans. Stick to 48 months so you pay off the principal faster than the car depreciates.
When you sit down with a car salesman, their first question is almost always: "What monthly payment are you looking for?" Do not answer this question.
If you say you want to pay $350 a month, the dealership will simply extend a 4-year loan into a 7-year loan to hit your target number. They will successfully get your monthly payment to $350, but because the loan is stretched out over 84 months, you will end up paying thousands of dollars in extra hidden interest. Always negotiate based on the Total Price of the Vehicle, never the monthly payment.
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