How to Calculate the Interest Rate on a Car Loan

2019 Acura RLX

If you’re working within a strict budget while shopping for your next vehicle around Chamblee, you’ll want to learn how to calculate auto loan interest. This is a necessary step in determining exactly how much your monthly payment will be for each vehicle. Take a moment to learn about how to figure interest on a car loan! Then, apply for financing and contact Ed Voyles Acura to further discuss your options in Chamblee! 

What is an Interest Rate? 

When determining how to figure out the interest rate on a car loan, you need to know what an interest rate is in the first place. No shame, if you don’t. Most Brookhaven drivers who purchase a car take out a loan to cover its value, which they pay off over time. Your lender will charge you a fee for providing you with a loan. This fee is called an interest rate; it’s a percentage of your monthly payment that goes to the lender as a profit. 

How to Calculate Auto Loan Interest 

Now that you know what an interest rate is, it’s important to know that the smaller your loan is and the less time you take to pay off your loan, the less interest you pay. That is to say that, if you choose a shorter loan term and put a larger down payment towards your auto loan, you’ll pay less overall interest. 

Furthermore, your interest rate is determined by your credit score. You can apply for pre-approval to get a good estimate of what your interest rate will be when you receive a loan. Once you’ve received an estimated interest rate, you’ll first need to know how to figure interest on a car loan for the very first payment you make towards your loan. To do so, follow these steps for how to calculate auto loan interest rate: 

  1. Divide your interest rate by the number of payments you’ll make towards your car loan this year.
  2. Then, multiply that figure with the balance of your loan, which is the entire principal (because, at this point, you haven’t made any payments towards the loan).

How to Figure Interest on a Car Loan Going Forward 

You know how to calculate an interest rate on a car loan and how to calculate overall auto loan interest for the first payment. Now, let’s take a look at how to calculate interest for the remaining payments of your auto loan: 

  1. Take the interest you calculated for the first payment, and then, subtract it from the first payment you just made. This will leave you with the amount of money you actually paid towards the principal of your loan. 
  2. Take this figure and deduct it from the total principal, and repeat the steps of the previous section to determine your new overall interest with the new loan balance. 

Discuss Auto Financing With Ed Voyles Acura in Chamblee

Now that you’ve read about how to calculate interest rates on a car loan and how to calculate total auto loan interests, we understand if you’re overwhelmed. Don’t hesitate to reach out to the financing department at Ed Voyles Acura for help. Our financiers can walk you through the process, help you identify the best financial options for your needs, and explain interest rates with total transparency. While you’re here, be sure to explore our new vehicle specials to see how much you can save near Dunwoody! 

 

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