When you take out a loan to buy a new vehicle near Bridgewater, you’ll be charged interest. How much will your interest rate impact your monthly payments and total amount owed? Learn more with Flemington INFINITI as we discuss how to calculate interest rate on a car loan, below.
Before we cover how to figure interest on a car loan, let’s first take a look at what interest is, and the factors that can impact it. If you buy a car on credit, your lender owns the vehicle until the time it is fully paid off. The interest rate you pay is essentially a fee you pay your lender because you’re using their money to buy your vehicle. The interest rate you end up paying your lender can be influenced by a number of factors, including:
If you need to know how to calculate auto loan interest for your first payment, you can follow this simple calculation:
The number you get is the interest you’ll pay for the first month of your repayment period.
Once you’ve begun to pay off your principal, you’ll want to calculate your new balance to figure the interest you’ll pay in the coming months. Here’s how:
You’ll need to round the answer up or down, meaning you won’t get an exact number every single time, but this will provide a good idea of how to calculate interest rate on a car and how much you’ll pay over time.
If you’re feeling a bit overwhelmed as you learn how to calculate interest rate on a car, the friendly professionals at our finance center near Bensalem, PA are here to help! They’ll take you step-by-step through how to figure interest on a car loan, answering all of your questions along the way. Contact us for additional help, if you ask questions about trading in a financed car, what is good mileage on a used car, used car leasing, how car finance works, and if you’re looking to get a basic start to estimate the monthly payments for the new vehicle you’ve got your eye on, check out our online payment calculator.