If you have a car that’s near the end of its life, or just looking to trade your current one in for something new, then figuring out what you can afford is important. New car shopping for some consumers may seem intimidating, but with some tools, it can be made easier. One of the most intimidating parts about finding a new car, even if it’s used, is figuring out how you will pay for it. Paying for a car usually involves several factors such as down payment size, trade-in value, sales tax, loan interest rate. Luckily there is a place to calculate all these things, found here, to figure out what your car payment size would be.
Down To Pay
When calculating your car payment, you need to consider several factors. US News & World Report has a car payment calculator that includes each of the factors listed above. For your down payment, experts say paying about 20% of the car’s value right away helps you in the long run. Since financing continues to be a great option for many, dropping a significant downpayment lessens the burden you face from loan payments.
Trade And Play
Another way to lower your car payments is to use your current car’s trade-in value. If you outright own your vehicle, meaning you do not owe money on it still, then trading it in lowers the overall cost of the new car. Effectively this would allow you to rid yourself of having to sell your old car and make your future payments on it smaller.
The next set of factors involved in calculating a car payment include the sales tax and interest rate from the financing. Before we get into taxes, note that each state has its own car sales tax, with Illinois’ car sales tax rate being 7.5%. The overall loan used to purchase the vehicle usually includes the overall loan taken out to purchase the vehicle, which is the final factor in car payments. Just like with any loan, certain characteristics of your finances will be used to calculate your loan rate. Any approved loan company uses a person’s credit score, debt to income ratio, and employment history to determine their rate.