Everything You Need to Know About a Car Loan Estimator

A car loan estimator is a great tool to help you know what you will spend if you purchase a vehicle. These estimators are the perfect way for you to see if you can fit the new car payment into your budget.

Using a Car Loan Estimator

While you can find different loan estimators on various websites, they all contain the same basic components. These sections must be filled out to get the most accurate number. All calculators will include:

• The purchase price: The purchase price is the amount you expect to pay at the dealership. Be sure to include any discounts you will be entitled to that reduce the sticker price. You will also want to include other costs such as delivery, title, and tax if you plan to roll it all into the loan.
• The estimated interest rate: There might be different ways to determine your interest rate. If you have been preapproved and know the interest rate you qualify for, you can enter it. Some calculators will have sections where you can estimate your credit score and find the average loan rates for that score range.
• The down payment: There will be a place to enter the amount of money you plan to put down on the vehicle. This could be in the form of a cash down payment, the value of your trade-in, or both. If you are unsure of your trade-in value, Kelley Blue Book can provide you with a range based on your vehicle specifications.
• The length of loan: You will also need to enter the term of your loan, which will be in months. Typically loans will be in increments of 12, 24, 36, 48, 60, and 72 months. The shorter the loan duration you choose, the higher the monthly payment will be, but the lower your overall interest will be.

Types of Car Fees

When considering the car’s total price for the calculator, it is essential to understand that extra costs and fees will likely be rolled into the final vehicle price.

• Sales tax: If you are in a state that charges sales tax, you will need to pay this amount as part of the final cost of the vehicle.
• Title and registration fees: Regardless of whether you buy a vehicle from a dealership or a third party, you will pay a title and registration fee. A dealership can register the car or transfer an existing registration for you, making it easy to just drive away legally in your new car. They can also roll these fees into your loan. If you buy from a third party, you will still have to pay title and registration fees to your state’s Department of Motor Vehicles. Loans do not typically include these for private party sales.
• Document fees: Most dealerships charge a document fee to cover the expense of processing and filing documents, such as the vehicle title.
• Destination fee: A fee often falling between $800 and $2,000 is the destination fee, which covers the cost of shipping the vehicle from the manufacturer to the dealership.
• Advertising fees: Dealers will recover their fees for promoting their vehicles by charging an advertising fee. This may be line-itemed or included in the car’s price and tends to run between $200 and $300.

While you can’t avoid taxes or title and registration fees, you may be able to negotiate your way out of document, destination, and/or advertising fees if you’re a shrewd negotiator.

Types of Car Loan Estimators

There are a few different types of car loan estimators that you may encounter:

• Reverse vehicle loan calculator: These calculators work best if you have a specific monthly payment in mind that fits your budget. It will show you how expensive of a car you can afford to meet that monthly payment.
• Vehicle loan amortization calculator: With this calculator, you can see the principal owed on the car and the interest for each month during the loan.
• Vehicle loan refinance calculator: If you think you can get a lower interest rate, these calculators can show you how much you may save if you refinance your current loan.

How to Prepare for Your Car Loan

Preparing for your car loan and gathering the information you need to complete your car loan estimate involves similar steps. By following these simple steps, you will make the process run more smoothly and likely have a better outcome:

1. Narrow down your vehicle choices. One of the first steps is determining the type of vehicle or brand of vehicle you are looking to finance. By having an idea of the type of car you want, you will be able to determine the average sticker prices of the vehicles you are interested in.
2. Calculate your down payment or trade-in value. Determine how much you can comfortably put down on your vehicle or estimate how much you may get for your vehicle trade-in. If you have a trade-in with a lower value, you may want to look for special offers where the dealership will add to the cost of your vehicle trade-in towards purchasing a vehicle.
3. Address any credit issues. To avoid surprises when applying for your financing, you will want to find out your credit score and if any issues may lead to financing problems. Bad marks on your credit can significantly increase your interest rate, so if there are any things on your credit report that should be disputed, now is the time to do it. Get your free credit report and address any issues.

Should You Choose a Direct Lender or Finance Through the Dealership?

Many consumers are unsure whether financing through the dealership or a direct lender is the best option. Typically, buyers will secure the financing for direct lending before they go to the dealership to make their vehicle purchase. Direct lending comes from a credit union, bank, or other financial institution. Direct lending comes with benefits such as:

• It allows you to know you have secured financing before choosing a car
• It gives you the option of price shopping at multiple dealerships
• It gives you the time to shop for the best interest rate

With dealer financing, all of the financial paperwork will be done at the dealerships. They will run your application through their network of lenders and provide you with the lowest rate out of them. While the contract for this type of lending is still with the dealer, they will often assign it to an outside financial institution. While you may be more limited with your options for choosing a lender when you go through dealership financing, there are some benefits, such as:

• The ability to complete the entire car-buying process in one place
• The ability to search for multiple rates with one application
• The ability to take advantage of special financing options from car manufacturers often unavailable with direct lenders

Car loan estimators are a great tool to help determine how much you can spend on a car. They also let you know the actual amount you will be paying for your vehicle before you make your decision.

FIXD Research Team

At FIXD, our mission is to make car ownership as simple, easy, and affordable as possible. Our research team utilizes the latest automotive data and insights to create tools and resources that help drivers get peace of mind and save money over the life of their car.