Before you buy a new or used car, you may want to do some homework about the value of your current car. A trade-in calculator can give you an accurate estimate of what your current vehicle is worth. Whether your existing vehicle is fully paid off or you have negative equity, you can use a trade-in calculator to get a more accurate estimate of your monthly payments when you purchase a new car.
A trade in calculator is a great tool that can help you learn the value of your current vehicle. It estimates the value of your car based on factors like mileage, condition, and demand for your specific make and model. A trade-in calculator can also factor in any money still owed on the vehicle to help see if you have any negative equity that may affect the selling price.
Once you have input all of this information into the trade-in calculator, you will have a good idea of your trade-in value. This amount can then be used as a trade-in allowance and help towards the purchase price of your next vehicle.
Why Is an Accurate Trade-In Valuation Important?
Knowing how much your old car is worth is crucial when buying a new one. It can help you get a good deal through negotiation. Car buyers who are armed with the true value of their existing vehicle price can save money on new car loans.
Keep in mind, however, that your trade-in price is not the same as the fair market price of your vehicle. You should do everything you can to increase the value of your old car before you visit the dealership. Check out How to Improve Your Trade-In Value for helpful tips today.
How Can Your Old Vehicle's Trade-In Value Help Your New Car Purchase?
Some car buyers view a trade-in value as a second type of down payment. When you put a trade-in towards your next vehicle, it can help reduce the sales price and make your monthly payments smaller. Sometimes, an accurate trade-in value can also reduce the sales tax rate.
Should You Also Use an Auto Loan Calculator?
Along with a trade-in calculator, it can also be a good idea to use an car loan calculator before you visit your local dealership. An auto loan calculator can help you estimate the budget you will need for your new car loan. It can even give you a better idea about what your estimated monthly car payment will be.
A car loan payment calculator estimates the amount of money needed to purchase a new or used car. It can help determine the monthly payment and how much you may need as a down payment. It considers a variety of factors such as the sales price of the vehicle, interest rates, loan terms, down payment, and your trade-in value.
Estimating Your Car Loan
To estimate your monthly car loan payment, you will first need to add the price of the vehicle, minus any savings you may have at the dealership, such as a cash rebate or discounts. With this number, you will add any additional fees, such as a destination fee, to get a more accurate estimate of the final price of the vehicle.
Then, you will use the interest rate associated with your credit score to figure the total interest cost over the life of the loan. The loan term can be used to adjust this number up or down until you find an auto loan term with reasonable interest payments for your unique budget. Finally, you can subtract the down payment you plan to make and your trade-in valuation to figure out your ideal car loan amount.
What Do You Need to Know About Interest Rates?
The average interest rate for any car buyer is primarily based on the car buyer's credit score. If you have a moderate to high credit score, you will usually have a lower interest rate. On the other hand, if you have a poor credit score between 300 and 500, your interest rate can be as high as 11.53% to 14.08%. A higher interest rate means more total interest paid on your car loan payments.
When you are considering financing a car, it is important to keep an eye on your credit report. Credit scores rely heavily on your credit history. If you know what your history looks like, you can work to improve it and get better credit standing. Credit scores improve when you can pay down consumer debt, pay off larger loans, and have a consistent payment history for all your creditors.
How Much Should You Save for a Down Payment?
In general, you should have at least 10% to 20% of the selling price of the vehicle you plan to purchase as a down payment. While there may be some auto loans that do not require a down payment amount, it's still a good idea to save for a down payment so you can reduce your monthly payment overall. The larger your down payment, the less you will have to take out for your auto loan amount.
Aside from the total loan amount, loan terms, and how your credit score impacts your interest rate, there are several other factors you will need to keep in mind when you compare auto loan offers. For example, some lenders may pay more attention to your take-home pay to assess how well you will be able to afford a monthly car payment. Other factors you should consider include:
Credit Union vs Bank vs Dealership Loan
Most of the time, getting an auto loan from a credit union is more affordable than getting an auto loan from a bank. Not only will a credit union have better requirements for a down payment and may have better interest rates, but you may also be able to benefit from credit union membership benefits.
Of course, many other car buyers prefer to secure better loan terms for auto loans when you work directly with the dealership. The dealership will do the heavy work of hunting for the best interest rate for your credit score and will be able to offer a more flexible loan term. Car loans from car dealers may also be easier to qualify for if you have moderate credit and also make the buying process much more convenient.
Short Loan vs Long Loan
There are several advantages and disadvantages to different loan terms. In general, a short loan term will have a higher monthly payment but a lower interest rate. On the other side though, a longer loan terms will have a lower monthly car payment and a higher interest rate.
The most popular loan lengths tend to be 48 to 60 months, but longer term loans such as 72 months are available. It is important to consider where you want your auto loan payment amount and annual percentage rate (APR) to be.
Additional Fees
In addition to the car price and operating costs of your vehicle, there may be other fees you will need to pay up-front when you purchase a car. Some of these fees can include registration fees, licensing fees, destination fees, and other fees. You will also have to pay the sales tax on your car.
You will also need to arrange for car insurance when you buy a new car. Full coverage insurance, liability insurance, and natural disaster insurance are all essential for car owners who want to protect the value of their vehicles in the long run.
You should mention your plans to use trade-in valuation for your new or used car payment when you visit the dealership. The financing department at the dealership will work with you to reach a car price you can afford. Your trade-in amount can have a significant impact on the remaining balance on your total loan, so being upfront about your negotiation strategy can make the process easier.
Once you are ready, head to Landmark Dodge Chrysler Jeep Ram in Kansas City, MO. Our knowledgeable sales and finance teams are here to help you through the car buying process. We are ready to get you into your next vehicle. Call us today at 816-251-2699.
