With prices that average more than $ 31,000 to buy a new vehicle at a dealership and about $ 17,000 for a used model, you may be considering financing or leasing for your next vehicle.
You have two financing options, a direct loan or financing from the dealer.
If you opt for a direct loan, you get a loan directly from a bank, financial company or credit union. In this scenario, you agree to pay the
financed amount, plus the agreed interest rate, for a period of time. When you make a purchase contract for a vehicle with a dealer, use the loan granted by the direct lender to pay the vehicle to the dealer. All of this is part of understanding an auto loan calculator might help you make the right decision.
What can a direct auto loan calculator can offer you.
The opportunity to compare. You have the possibility to directly search, compare and find out the car loan terms of several providers before committing to buy a specific vehicle.
The possibility of knowing the auto loans terms in advance. If you get financing before buying the vehicle, when you go out to buy the vehicle you will already know the interest rate and the terms that will apply.
If you opt for dealer financing – another common type of vehicle financing – you get the loan amount through the dealer. In this case, you and a dealer formalize a contract which states that you buy a vehicle and agree to pay the amount financed, plus the agreed tax and fees, for a period of time. The concessionaire can retain the contract, but usually sells it to a bank, finance company or credit union – called assignee – which manages the account and collects the payments.
What a dealer auto loan calculator can offer you:
Convenience. The dealers offer vehicles and financing in one place, and they may have more extended hours, for example, in the evening and during the weekends.
Multiple financing options As the dealer can have a relationship with several banks and finance companies, if you finance the purchase through the dealership you can access a wide variety of options.
Special programs. Dealers can sometimes offer some products and services sponsored by vehicle manufacturers or programs with low-interest rates or incentives for buyers. These programs may be limited to certain vehicles or have special requirements, such as a higher down payment or a shorter contract (36 or 48 months). To participate in these programs, you may be required to have a high credit score; Find out if you meet this requirement.
Remember: Search and compare before deciding to buy or make a leasing contract. Consider offers from different concessionaires and from various sources of financing, including banks, credit unions,
Before using an Auto Loan Calculator for buying a vehicle or leasing it.
Consider federal and state laws
Review federal and state laws that affect the process of financing and leasing a vehicle. These laws offer you important information that may be useful to negotiate a better loan term deal or to better understand of the process. They also grant you certain rights.
Determine how much you can afford
Before financing or leasing a vehicle, analyze your financial situation to make sure you have enough income to cover your monthly payments. Then, if you want to finance the purchase of a vehicle, know that the amount you will pay in total will depend on several factors, including the price you negotiate for the vehicle, the annual percentage rate or APR, which may also be negotiable, and the duration of the credit agreement.
Decide to finance or lease a vehicle when you know you are able to take on a new obligation. Check the overall cost of the purchase or the leasing contract.
When negotiating an auto loan calculator or leasing a car consider the amount of payment or monthly fee.
The only appropriate time to consider taking on additional debt is when you spend less than you earn. The extra burden of the debt you decide to assume should not affect the amount you set out to save for emergencies or for other priorities or life goals. By saving money for a down payment or delivering a vehicle as part of a payment, you can reduce the amount of money you need to finance and reduce your financing costs. In some cases, the value of your vehicle delivered as part of payment can be used to cover the initial payment of your new vehicle.
If you owe an amount greater than the market value of your vehicle, you have a negative net worth. This is something that you have to take into consideration if you plan to use your vehicle to deliver it as part of the payment. The longer your new credit agreement, the longer it will take to reach a positive net value on the new vehicle – that is, until it is worth more than you owe. If you have a negative net worth, you will have to make a higher down payment. Another option would be for the dealer to offer to include the negative net value in your new financing contract by increasing the value of the financed amount to include the amount you still owe on your current vehicle.
This will increase the number of your payments or monthly fees on the new contract in two ways: what you owe adds to the amount financed and increases the finance charge. If you have a negative net worth on your vehicle, that is, if you owe more than it is worth, consider canceling the debt before buying another vehicle. And if you use the vehicle as part of a payment, ask what effect your negative net value will have on your new credit obligation.
Monthly expense plan
For an Auto Loan Calculator or lease, consider all the costs involved, do not think only of the payment or monthly fee. Knowing how much you spend monthly and taking into account your saving purposes and habits will be useful to make a more realistic budget.
Subtract the amount of money you need to cover all of your savings goals and your monthly expenses, including monthly credit payments and what you pay every month to cover your housing and utility costs.
The remaining balance is the maximum amount you can afford to pay as a monthly fee for a vehicle and all new related expenses, for example, vehicle insurance.
The remaining balance in Column 2 will indicate whether you are able to afford the payment of a new vehicle and the modification of your expenses.
Complete Column 1 based on your current situation. Begin by writing down the amount of your net income. It is the money you have left after deducting taxes and other deductions.
Complete Column 2 based on your new situation. In this
|Net monthly income||$ ______________________||$ ______________________|
|Savings||– $ _____________________||– $ _____________________|
|Payment of the mortgage / rent||– $ _____________________||– $ _____________________|
|Public services||– $ _____________________||– $ _____________________|
|Food||– $ _____________________||– $ _____________________|
|Transport||– $ _____________________||– $ _____________________|
|Insurance (Housing, vehicle, life)||– $ _____________________||– $ _____________________|
|Taxes||– $ _____________________||– $ _____________________|
|Clothing||– $ _____________________||– $ _____________________|
|Personal expenses||– $ _____________________||– $ _____________________|
|Entertainment||– $ _____________________||– $ _____________________|
|Gifts and contributions||– $ _____________________||– $ _____________________|
|Education||– $ _____________________||– $ _____________________|
|Credit card payments||– $ _____________________||– $ _____________________|
|Payment (s) of the vehicle||– $ _____________________||– $ _____________________|
|Various||– $ _____________________||– $ _____________________|
|REMAINING BALANCE||= $ _____________________||= $ _____________________|
When requesting an Auto Loan Calculator
Most dealerships have a Financing and Insurance (F & I) Department where they will provide information on the available financing options. The Manager of the Financing and Insurance Department will ask you to complete a credit application that may include the following information:
- Your name.
- Your Social Security number
- Your date of birth.
- Your current address and the previous address (s) and the amount of time you lived in each place.
- The name of your current employer and that of your employer or previous employers and the amount of time you stayed at each job.
- Your occupation.
- Your sources of income.
- The total of your gross monthly income.
- The financial information of your credit accounts, including your debt obligations.
Most grantees will request a copy of your credit report that contains information about your current and previous credit obligations, your payment record and public record data (for example, a bankruptcy filing registered in court records).
The credit report indicates the number, type, and terms of each of your accounts, and the credit limit, the last balance and the most recent payment on those accounts. The comments section describes the current status of your account, including a summary of the creditor referring to information about unpaid debts and any legal action taken to collect those obligations.
Typically, the dealer presents your credit application to one or more potential assignees or assignees, such as a bank, finance company or credit union, to determine if they are willing to buy your contract from the dealer.
These Auto Loan Calculator companies or other potential assignees, evaluate your credit application using automated techniques, such as the credit scoring system, which
When you process the Auto Loan Calculator through a dealer, the potential assignee will not deal directly with you. Your evaluation is based on the data of your report and credit score, the data entered in the credit application and the terms of the sale, such as the initial payment amount. Each potential assignee or assignee decides if it is willing to buy the contract, notifies the dealer of its decision, and in the corresponding cases, offers the dealer the wholesale rate that will be applied to the purchase of the contract, often called the “purchase rate”. “
Your dealer may offer you some incentive granted by the vehicle manufacturer, such as reduced financing rates or cash withdrawals for certain models. You may see these special offers in ads posted in your area and on the internet. Be sure to ask your dealer if there is a special Auto Loan Calculator offer available for the car model you are interested in purchasing. Generally, these discounted rates are non-negotiable, may have limitations based on a consumer’s credit history,
When there is no special auto loan calculator offer available, generally, you can negotiate the annual percentage rate (APR) and the terms of payment with the dealer in the same way you negotiate the price of the vehicle. Usually, the APR rate that you negotiate with the dealer is higher than the wholesale rate described above because it includes an amount to compensate the dealer for dealing with the financing. This negotiation can be done before or after the dealer accepts and processes your credit application. Try to negotiate the lowest possible APR rate in the same way you would negotiate the best price for the vehicle.
The concessionaires that promote rebates, discounts or special prices must clearly explain what are the applicable requirements to access these incentives. For example, these types of offerings may be available to recent college graduates or members of the armed forces, or they may have reductions that only apply to specific vehicles. Find out if you meet the requirements to access rebates, discounts or special offers available as they can help you reduce the price of your vehicle and therefore, the amount that finances or is part of your lease.
Most consumers who apply for a credit will receive a notice of disclosure of their credit score. This notice includes a credit score, the source of that score and information about the place that score takes with respect to other consumers.
Ask questions about the terms of the contract before signing it. For example, before leaving the dealer’s premises driving the vehicle, ask if the terms of the contract are final and if they are fully approved. If the dealer tells you that you are still working on the approval, keep in mind that it is not yet a definitive deal.
Consider waiting until you sign the contract and stay with your current vehicle until funding is fully approved. Or find out about other funding sources before signing and leaving your car at the dealer’s location.
When looking for an
Auto Loan Calculator, should I do a lease for a vehicle?
When a vehicle is acquired through a lease, or rent with purchase option, you have the right to use it for the
Usually, the monthly payments of a lease are lower than the monthly payments of the financing of the same vehicle because with a lease you are paying the depreciation of the planned vehicle during the leasing period, plus a rental charge, taxes,
To determine if a lease suits your situation:
- Consider the costs you will have to pay at the beginning, middle and end of the lease.
- Compare different offers and terms of leasing, including the limits applicable to the number of miles or mileage.
- Consider the amount of time you want to keep the vehicle.
In most standard leasing contracts the mileage limit is calculated based on a number of miles you can roll, usually 15,000 or less per year. You can negotiate a higher mileage limit, but normally, the
When you lease, you have to take responsibility for excessive wear and tear and for any missing equipment or components. You must also service the vehicle according to the manufacturer’s recommendations and must have insurance that complies with the rules of the leasing company.
For more information, read Keys to Vehicle Leasing , a publication of the Federal Reserve Board available in English and Spanish.
How about having a co-signer?
A credit grantor may ask you to file a co-signer to sign the Auto Loan agreement to compensate for any deficiencies in your credit history. As a co-signer, you assume the same contractual responsibility. The payment history of the account will be reflected in both the credit report of the borrower and the co-signer. For this reason, you should be careful if someone asks you to act as a co-signer of a loan. Co-signers have a legal obligation to repay the contract, so before agreeing to act as a co-signer for another person, be sure you know what the terms of the contract are and think about whether you are able to afford the payments.
If you are denied a credit or if you suffer some other adverse action that is based on the information in your credit report, you may be able to get additional copies of your report for free. Usually, after submitting your funding application you will receive your credit score that is part of a credit score disclosure notice.
If you want another copy of your credit report, but you already received your free copy, you can buy your report by paying a small fee. Establish contact with the three credit reporting agencies in the country.
Before signing any document, be it at the dealer, bank, finance company or credit union, you should understand the specific terms of the financing.
Assignee or assignee – The bank, financial company or credit union that buys the contract from the dealer.
Financial charge – The cost of the loan expressed in a dollar amount. You can negotiate this figure.
Extended service contract – Optional protection that can be purchased to cover specific mechanical and electrical components of the vehicle. Complements any warranty coverage that comes with the vehicle.
Fixed rate financing – A financing with a financial rate that remains the same throughout the duration of the contract.
Variable rate financing – A financing with a varying financial rate, and consequently, the amount you must pay is also modified throughout the duration of the contract. This type of rate is not very common in vehicle financing transactions.
Credit report – A document that includes information about your place of residence, how you pay your bills, and whether you have been sued or filed for bankruptcy. Credit reporting agencies across the country sell the information in your report to credit grantors, insurers, employers and other businesses that use it to evaluate your credit, insurance, employment or rental applications.
Amount of payment or monthly installment – The amount of dollars that must be paid every month to repay the loan, financing contract or the leasing agreement.
Amount financed – The amount of the loan expressed in dollars.
Initial payment – An initial amount that is paid to reduce the amount to be financed.
Negotiated price of the Auto Loan Calculator – The purchase price of the vehicle agreed between the buyer and the seller. This price should reflect every rebate, discount or special offers you can get at the dealership if you meet certain requirements, all of which must be clearly reported.
Additional products or services – Products or services that the dealer can offer you in a sale, financing or leasing. Some examples are extended service contracts, credit insurance,
Guaranteed car protection (GAP) – Optional protection that covers the difference between the amount you owe on the vehicle and the amount you would receive from your insurance company if your vehicle was stolen or if you had a destruction event before you canceled your vehicle. Credit obligation.
Credit score – A number that reflects your level of credit risk based on information in your credit file. The better your credit history, the higher your score will be. Your credit score can be used to help determine the interest rate and financing terms that will be offered.
Recover – If you do not make payments on a vehicle within the established deadlines, your creditor may have the right to recover it without having to resort to the Court or to notify it.
Credit insurance – Optional insurance that covers the expected unpaid balance in the event of your death or the scheduled monthly payments in case you suffer a disability. The cost of the optional credit insurance must be established in writing. If you decide to buy it, you must sign to accept it.
Wholesale rate (purchase rate) – The financial rate applied by an assignee or assignee when buying a retail sales contract in installments from a dealer.
Annual percentage rate or “APR” rate – The cost of credit expressed in terms of the annual rate. You can negotiate this rate. Examples of some of the factors that influence your APR: your credit history, current financial rates, dealer compensation, competition, market conditions,
Total payments – The total amount paid after making all scheduled payments as established in a loan or financing agreement. For a lease, it is the amount you will have paid at the end of the leasing contract.
Negative net value – The amount owed on a vehicle that exceeds its market value. For example, if the balance owed to pay off your credit amounts to $ 18,000 and the market value of your vehicle is $ 15,000 you have a negative net worth of $ 3,000.
Find the most convenient deal to finance a vehicle
When you have to use an Auto Loan Calculator the purchase of your vehicle, search, analyze and compare the financing terms offered by more than one credit grantor. You are going to buy two products: financing and the vehicle. Negotiate the terms and consider several offers. Before signing a contract, take the time necessary to know and understand the terms, conditions and financing costs of a vehicle. If you sign a contract, ask for copies of the signed papers to be delivered before you leave the dealer’s premises or the credit institution. Before retiring driving your new vehicle do not forget to confirm that the deal is final.
|Grantor of credit 1||Grantor of credit 2||Grantor of credit 13|
|Negotiated price of the vehicle||$ ____________||$ ____________||$ ____________|
|Initial payment||$ ____________||$ ____________||$ ____________|
|Deduction for the delivery of your vehicle in part of payment (the swap or swap of your vehicle, could imply a negative net value)||$ ____________||$ ____________||$ ____________|
|Extended service contract (optional) *||$ ____________||$ ____________||$ ____________|
|Credit insurance (optional) *||$ ____________||$ ____________||$ ____________|
|Guaranteed car protection (optional) *||$ ____________||$ ____________||$ ____________|
|Other optional products *||$ ____________||$ ____________||$ ____________|
|Amount financed||$ ____________||$ ____________||$ ____________|
|Annual percentage rate or APR rate||___________%||___________%||___________%|
|Financial charge||$ ____________||$ ____________||$ ____________|
|Duration of the contract in months||_____________||_____________||_____________|
|Amount of payments or fees||$ ____________||$ ____________||$ ____________|
|Payment amount or monthly fee||$ ____________||$ ____________||$ ____________|
- Optional items that are not compulsory to buy. If you do not want to buy these items, tell the dealer and do not accept them with your signature. Make sure that the cost of these items is not included in the monthly payments or in another part of the contract you sign.
Consider the total costs of financing the vehicle, not just the monthly payment. It is important that you compare different payment plans, both for the monthly payment and for the total amount of payments required, for example, for a credit purchase of 36 months / 3 years and 60 months / 5 years. In general, longer contracts will have lower monthly payments, the total
|Term (duration)||3 years – 36 months||5 years – 60 months|
|Purchase price||$ 31,000||$ 31,000|
|Initial payment (20%)||$ 6,200||$ 6,200|
|Amount financed||$ 24,800||$ 24,800|
|Contract rate (APR)||5.00%||5.00%|
|Financial charge||$ 1,958||$ 3,280|
|Payment amount or monthly fee||$ 743||$ 468|
|Total payments||$ 26,758||$ 28,080|
The Law of Consumer “
The Credit Practices Rule establishes that the credit grantors must deliver to the potential co-signers a notice informing them of their responsibility if the other person does not pay; prohibits late payment charges for some situations; and prohibits credit grantors from using certain contractual provisions that the government considers inequitable for consumers.
The Equal Credit Opportunity Act prohibits discrimination related to credit based on gender, race, color, marital status, religion, nationality or age. It also prohibits discrimination related to credit based on the fact that you are receiving public assistance or have exercised the rights granted by the Federal Consumer Protection Law in Credit Operations. This law establishes that certain credit grantors must provide information to consumers when they deny financing or take other adverse action.
The Fair Credit Reporting LawIt establishes several rights for consumers, including the right to receive a free credit report per year from each of the three credit reporting agencies in the country. It also states that consumers can call a phone number to report a case of identity theft to credit reporting agencies. It also establishes a process that allows consumers to dispute information recorded in their credit records that they believe is inaccurate or incomplete. It also provides that if a credit grantor uses the reports and credit scores of consumers as a basic element to deny credit or take other adverse actions against consumers, they must submit their respective reports and credit scores, and that in certain circumstances,
Under the Rule of Prices Based on the Client’s Risk Level , most consumers who request financing have the right to receive information about their credit scores. Most credit grantors comply with this rule by providing a Notice of Credit Score Disclosure to consumers who request financing for the purchase of a vehicle. This notice contains a consumer’s credit score and other information to contextualize the score (for example, data that indicates how that consumer’s credit score compares to other consumers’ credit scores).
The Veracity in Loan Transactions Act states that before you sign a credit agreement, the grantors must provide you with a written document that contains the important terms of that agreement, such as the APR rate, the finance charge, the amount of the payment. monthly, the dates of payment, the amount financed, the duration of the credit agreement and any applicable charges for late payment.