Before you apply for a car loan, you want to make sure you’re getting the best deal possible. That means paying the lowest possible amount in interest and fees, on a car loan over the shortest amount of time – while still ending up with loan repayments you can actually afford.
But, with all the car loan options available to you – how do you know you’re getting the best deal for you?
Three words: Use A Calculator. No, not the calculator app on your phone. As you search for car loans, try using car loan calculator to help you narrow your options and find the best car loan for your needs.
What is a Car Loan Calculator?
A car loan calculator is a tool designed to help you compare car loans. While the car loan calculators you will find online will vary in style, they all work in much the same way.
To start using the calculator, you will need to enter details relating the car loan you are looking to compare. This usually includes:
- The loan amount,
- The loan term,
- The loan’s interest rate, and,
- Its repayment frequency.
TIP: Some calculators may also factor in fees, helping you to further gauge the affordability and overall cost of the loan you want to compare.
Using that information, the calculator will give you important info regarding:
- How much your repayments will be,
- How much you will pay in interest,
- The overall cost of the loan.
How do you use a Car Loan Calculator to Compare Loans?
Okay, so you’ve got access to all the info – how does that help you in your search for the best car loan?
There are two ways a car loan calculator can help you find the best deal on a car loan. Let’s take a look.
Using a car loan calculator to compare multiple car loans
Let’s say you’ve narrowed your options to three car loans. You can use the calculator to compare each option in more depth, to find out which one will be most cost effective and affordable month-to-month.
- Car Loan 1 has an interest rate of 7.5% p.a. with monthly fees of $10 and no application fee.
- Car loan 2 has an interest rate of 8.1% p.a. with an application fee of $200 and no monthly fees.
- Car loan 3 has an interest rate of 7% p.a. with monthly fees of $5 and an application fee of $120.
You want to borrow $20,000 over a period of four years. Which car loan will be best?
- On car loan 1, your monthly repayment will be $494 (inc. fees), and your overall interest cost will be $3,232, Including fees, the total cost on this loan would be $23,712.
- On car loan 2, your monthly repayment will be $489, and your overall interest cost will be $3,472. Including fees, the total cost on this loan would be $23,672.
- On car loan 3, your monthly repayment will be $484 (inc. fees), and your overall interest cost will be $2,992. Including fees, the total cost of this loan would be $23,352.
Using that info, you can see car loan 3 offers the lowest monthly repayment and the lowest overall loan cost.
Using a car loan calculator to compare options on one loan
Another way a car loan calculator can help you compare car loans is to use the calculator to change the frequency of repayments, and the overall loan term.
Let’s say you want to borrow $30,000 on your car loan, but are unsure how long you need to pay it back. You’ve found a car loan offering a rate of 8.99% p.a.
- On a three year car loan, your monthly repayment would be $954, your overall interest cost would be $4,344, meaning you would pay back $34,344 in total.
- On a four year car loan, your monthly repayment would be $746, your overall interest cost would be $5,808, meaning you would pay back $35,808 in total.
- On a five year car loan, your monthly repayment would be $623, your overall interest cost would be $7,380, meaning you would pay back $37,380 in total.
- On a six year car loan, your monthly repayment would be $541, your overall interest cost would be $8,952, meaning you would pay back $38,952 in total.
- On a seven year car loan, your monthly repayment would be $483, your overall interest cost would be $10,572, meaning you would pay back $40,572 in total.
As you can see, while opting for a shorter loan term comes with a higher monthly repayment, it also means you pay much less in interest. The key to choosing the best loan option for you comes down to finding a loan repayment schedule you can afford, over the shortest period of time
Anything else to consider?
As you compare car loans using a car loan calculator, bear in mind the calculations provided should be used as a guide only. It’s also worth noting that the rate you see on loans advertised online may not be the rate that provider offers you. The rate you receive will depend on factors such as your credit score and how much you want to borrow.
Want to skip the unknowns? Car Loan World can help. At Car Loan World, we can help you compare car loan options, while keeping the stress factor for you at zero. Just tell us what you’re looking for and we’ll come back to you with car loans that match your needs – and your budget.