Financing
Calculate Your Monthly Car Payments
Most of us ordinary citizens cannot afford to buy a car outright so financing is usually necessary. To get to a low monthly payment, you must understand how to calculate a monthly payment.
Leasing – Your Car Payment
A lease payment can vary from a purchase payment. To calculate your lease payment, use this equation:
Car’s Sale Price – Residual Value of the Car =X
*The residual value can be obtained from the dealer or financing company.
Add X to: the car's original price + the residual value=Y
*This will be MORE than the new price of the car.
(Y x Interest Rate) + Monthly Payment this = Your Actual Monthly Payment.
Remember, sales tax will also be applied to this monthly payment and can increase your monthly payment by up to 10 percent.
Buying – Your Car Payment
When buying a new car the payment calculation differs since you will not be returning the car to the dealership. This calculation is more straightforward.
Take the sales price of the car, subtract the down payment and trade in value if applicable, add sales tax and the interest rate and divide by the length of the loan.
As in a lease arrangement, the more money paid outright upon purchase of the car the lower your monthly car payment.
But don’t forget that in either case your monthly payments calculated here do not included insurance, title fees, etc. which may increase your overall total out-of-pocket expenses.
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