Guide: Finding The Best Car Interest Calculator & Interest Rates for a Car Loan


One of the first major purchases that many people make is a car. Whether it is a $500 junkie that you purchase from your great uncle or a new car that you finance through the bank, buying a car is often one of the largest financial decisions that we make.

For first-time buyers, the interest rate for a car loan can seem innocent enough until one does the actual car loan interest rate calculations to find out just how much is being forked over in interest. 

Before even setting foot in an auto dealership, you might be wondering, “How is interest calculated on a car loan?”

Learning the basics of the interest rate on a car loan can help you understand how car dealerships make their money as well as you give you leverage as you negotiate for a better and more favorable rate. 

If you’re not an expert in math and the idea of doing long division or complicated multiplication brings back bad memories of high school math class, then a car loan interest rate calculator might very well be the best tool to help you understand the ins and outs of the interest rate for a car loan. 

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Image Source: Best Car Interest Calculator

In this brief article, AdvisoryHQ will look at why it is important to know how to calculate the interest rate on a car loan.

We’ll also look at the average interest rate for a car loan on the market today before examining how to calculate interest on a car loan. 

This article will also go over the best car interest calculators and examine what a car loan interest calculator does as well as the benefits of a car interest rate calculator for car buyers. 

We’ll end by reviewing four of the top car loan interest calculators available for free on the Internet in addition to looking at the pros and cons of each of these car loan interest calculators. 

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Why It Is Important to Know How to Calculate the Interest Rate on a Car Loan?

If you are on the market for a new car or a used car in decent shape, you’re easily looking at spending upwards of $10,000. Unless you have a heavily stacked savings account, chances are that you’ll need a loan to be able to purchase your car.

Learning the answer to, “How is interest calculated on a car loan?” is an essential step before deciding which car to purchase. 

Most agencies that sell new and used cars prefer when people purchase cars on credit as they stand to make much more money through the interest rate on a car loan that they charge.

While not all car dealerships are of questionable reputation, the cliché of the “sleazy” car salesman that does all he or she can to trick you into signing your name to a high interest loan is a reality. 

If you show up to a car dealership and demonstrate that you understand how to calculate interest on a car loan, you’ll likely receive a much better initial offer. Furthermore, if you know how to use a car loan interest calculator, you can easily gain the upper hand in negotiations on the terms and conditions of your loan. 

While no down payment and low monthly payments may sound enticing to many potential car buyers, the car loan interest rate calculations on those types of loans will quickly show that you’ll probably end up paying two or three times the price of the car over the course of the loan.

A simple interest calculator for a car loan can help you find a loan that works for your budget while not killing you in interest payments.

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Average Interest Rates on a Car Loan

The interest rates on a car loan can change quickly with the market. Furthermore, learning how to calculate the interest rate on a car loan will depend largely on the region where you live, your age, and what type of car you purchase. 

According to bankrate.com, the current national average interest rate for a car loan is at 4.25% – up from 4.17% in July of this year. The interest rate on a car loan for used cars is considerably higher, at 4.73% in October, though most used car loans are of shorter duration, ranging from 2–4 years, while most new car loans are at least five years. 

When learning how to use a car loan interest rate calculator, it’s important that you know the average interest rate in your region. Even a few percentage points of difference can add up to several hundred dollars over the course of your loan. 


How to Calculate Interest on a Car Loan

If you enjoy the challenge of somewhat complicated mathematics, you can do your own car loan interest rate calculations by hand. A (not so simple) formula to help you calculate the interest can be found below. 

Following from this equation, a $12,000 car loan taken out for a 60-month term at interest rate of 10% would leave you with $245.96 for your monthly payment.

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Image Source: Interest Rates on a Car Loan

If you’re like most people and find the above equation to be written in an incomprehensible foreign language, a car loan interest calculator will do the work for you. 



What Does a Car Loan Interest Calculator Do and the Benefits of a Car Interest Rate Calculator

Car interest calculators, simply put, help you calculate the interest that you’ll pay on your car over the term of your loan. A quality car interest calculator will also allow you to determine the monthly payment you’ll be making. 

Once you learn how to use a car interest rate calculator, you’ll be able to come up with the best car loan for you that will allow you manageable monthly payments while minimizing what you’ll pay in interest. 

According to IFS Auto Loans, “Most car loans use simple interest, a type of interest of which the interest charge is calculated only on the principal (the amount owed on the loan). Simple interest does not compound on interest, which generally saves a borrower money.

However, simple interest does not mean that every time you make a payment on your loan that you pay equal amounts of interest and principal. Instead, car loans are paid down via amortization, meaning you pay more interest at the beginning of your car loan than at the end.”

A good car interest calculator, then, will help you determine how the interest rate for a car loan is calculated month by month. If you’re able to make prepayments on your car loan, a car loan interest calculator will also help you determine how much you could potentially save in interest payments by paying off your loan in a shorter amount of time. 

Lastly, a car loan interest calculator can help you determine how much you can afford while shopping for a new car. That brand new SUV may be appealing, but even if the dealership was willing to give you a low monthly payment, you’d most likely end up paying several thousand dollars in interest. An interest calculator for a car loan might help you realize that a slightly-used, similar SUV is more adept to your budget restraints. 

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Best Car Interest Calculators on the Web

The easiest way to discover how to calculate interest on a car loan is to know where to find the best car interest calculators on the Internet.

If your old clunker is on its last legs and you need a new car in a hurry, any one of these four best car interest rate calculators can help you find the best deal. 

Bankrate Car Interest Calculator

The car interest calculator offered by Bankrate is a simple and easy-to-use tool that will help you determine how to calculate the interest rate on a car loan. The only information that you’ll need to enter is the auto loan amount, the loan term in years or months, the interest rate on the car loan, and the date the loan begins. 

The car loan interest calculator by Bankrate will quickly calculate your estimated monthly payment.

Furthermore, this quality car interest calculator breaks your monthly payment down into principle and interest so that you can see how much you will be paying in interest each month. A simple calculation will help you discover the amount you will be paying in interest over the term of the loan. 

Furthermore, this car interest calculator offers you advice on the current average interest rates for car loans and options for online lenders which you can compare to the dealership where you plan to purchase and finance your car. 

Onlineloancalculator.org Car Interest Calculator

The car loan interest calculator offered by onlineloancalculator.org is another of the top quality car interest calculators available on the Internet. With this interest calculator for a car loan, you can quickly and simply do your car loan interest rate calculations. 

Furthermore, this car interest calculator will also factor in your state tax percentage if you are required to pay tax on the purchase of your new car. A helpful amortization graph, repayment chart, and balance graph are distinct and helpful tools offered by this car loan interest calculator. 

Bank of America Car Interest Calculator

The Bank of America car interest calculator is another quality tool to help you easily answer, “How is interest calculated a car loan?” With this straightforward car loan interest calculator, you can even determine how much you’ll need for a loan, based on the overall price of the car, trade in value, amount owed on the trade in, down payment, and other factors. 

Obviously, the Bank of America car loan interest calculator is offered to potential clients in hopes that they’ll choose to finance their car with that bank. If you qualify for a preferred rewards account with Bank of America, you may be able to benefit up to a discount of 0.5% on the interest rate for your car loan. 

Cars.com Car Interest Calculator

Lastly, the cars.com car interest calculator is another option worth considering. This car loan interest calculator stands apart from the rest in that it offers you an option to check the value of your currently owned car to see how much trade-in value it has. 

Furthermore, this car interest calculator has an option that is specifically designed to help you determine the affordability of the car you want to purchase. You can put in the maximum monthly payment you’re able to make to see what price range of car you should be looking for.

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How an Interest Calculator for a Car Loan Can Help You in Your Purchase of a Car

Whichever car interest calculator you choose, it is important that you understand how to calculate interest on a car loan before you start shopping around.

A quality car loan interest calculator will help you determine if you’re being offered a fair loan as well as assist you to find out which car is within your budget.

Instead of depending on the promises of an unknown car salesman, car interest calculators will allow you to find the best car for your budget.

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