Quick Payment and Interest Calculations for Car Buying

With so many good financing offers out there, thought I would throw a quick reference guide together that you could print out and take to the dealer. Here goes:

1. (MF) money factor to approximate percentage rate: Multiply lease factor by 6,400.

2. Low APR financing monthly payment per $1,000 financed:

72-months 0% APR – $13.89 per $1,000 financed.
60-months 0% APR – $16.67 per $1,000 financed.
48-months 0% APR – $20.83 per $1,000 financed.
36-months 0% APR – $27.78 per $1,000 financed.

72-months 1.9% APR – $14.71 per $1,000 financed.
60-months 1.9% APR – $17.48 per $1,000 financed.
48-months 1.9% APR – $21.65 per $1,000 financed.
36-months 1.9% APR – $28.60 per $1,000 financed.

72-months 2.9% APR – $15.15 per $1,000 financed.
60-months 2.9% APR – $17.92 per $1,000 financed.
48-months 2.9% APR – $22.09 per $1,000 financed.
36-months 2.9% APR – $29.04 per $1,000 financed.

72-months 3.9% APR – $15.60 per $1,000 financed.
60-months 3.9% APR – $18.37 per $1,000 financed.
48-months 3.9% APR – $22.53 per $1,000 financed.
36-months 3.9% APR – $29.48 per $1,000 financed.

3. Here is one the car dealers don’t ever advertise: Total interest paid per $1,000 borrowed:

72-months 3.9% APR – $123.18 per $1,000 financed.
60-months 3.9% APR – $102.29 per $1,000 financed.
48-months 3.9% APR – $81.65 per $1,000 financed.
36-months 3.9% APR – $61.26 per $1,000 financed.

72-months 2.9% APR – $90.73 per $1,000 financed.
60-months 2.9% APR – $75.46 per $1,000 financed.
48-months 2.9% APR – $60.33 per $1,000 financed.
36-months 2.9% APR – $45.34 per $1,000 financed.

72-months 1.9% APR – $58.87 per $1,000 financed.
60-months 1.9% APR – $49.04 per $1,000 financed.
48-months 1.9% APR – $39.27 per $1,000 financed.
36-months 1.9% APR – $29.56 per $1,000 financed.

If your car costs $20,000 and you received 3.9% APR for 72-months you will have paid $2,463.60 in interest ($123.18 * 20).

Quick note on leases. Now that you know the total interest paid on the special financing terms, if you decided to lease on the spot with out doing your homework at least do this quick check before you sign any papers.

Multiply your total payments.
Add your down payment. (Should be zero or very small)
Add your trade in allowance.
Add any rebates and incentives.
Add in the residual value of the car. (Should be as high as possible)

This is you total price of the car. Does it make sense? Is it high compared to traditional financing? If you are doing a 36-month lease, look at what your total cost of the car would be using traditional financing using the charts above. For a car that costs $20,000 financed at 3.9% for 36 months you will pay a total of $21,225.26. If you do your calculation above for your lease and it turns out to be $25,550, you know you have a terrible deal.

Word of warning here. Just because the numbers match the good financing does not mean you have a good deal. If you are at the dealer and reading this and you don’t know why, then take the information down and tell the dealer you will call him with your acceptance within 24 hours. Go home and walk through the calculations on this site and determine if your lease meets the proper factors for being a good deal.

If you are arithmetic challenged, post the information in the discussion board or on any other car buying discussion board and wait for responses.

Never rush a lease unless you are already familiar with each factor before you go into the dealer.

Good luck!


8 comments

  1. ReplyMissy

    Can you add to this page the 0.9% monthly payments. I use this grid as a resource. thanks! going thru your site, enjoy what you have provided.

    Is this still a current updated site?


    1. Author
      ReplyBetterValue

      Sure,

      0.9%
      72-months 0.9% APR – $14.27 per $1,000 financed.
      60-months 0.9% APR – $17.05 per $1,000 financed.
      48-months 0.9% APR – $21.22 per $1,000 financed.
      36-months 0.9% APR – $28.16 per $1,000 financed.

  2. ReplyJenni

    Thank you so much for your hard work in posting this for us car buying “dummies”!!! I am in my mid 30’s, but have bought many cars. And from the time I was 19 until now, things have NOT changed. IT is still hard to believe the dealer is giving you a good deal. Meaning, I am not getting gouged, lol. We all have to make money, I wish they did it so everyone felt good about the first deal. At least you give us a great tool to use to take some of this hassle out. Thank you!!!

  3. ReplyKayla

    I want to buy a car that cost 21,000 I want a 36 month loan, and the dealership gave me two options
    Option A: $1,000 cash back and 4.5% APR
    Option B: 0.9% APR
    I have 2,000 for a down payment, but I want to know my best choice. I need to pay the Maryland title tax which is 6%, but I don’t need to consider the fees for license plates.
    -What would be the monthly payment for each option( considering down payment and taxes)?
    – How much interest will I pay over the entire duration of the loan, saying I pay the exact monthly payment on time each month, for both options?
    – How much in total, Including interest, down payment and taxes, Will I have paid for the car at the end of the loan for each option?


    1. Author
      ReplyBetterValue

      Hi Kayla,
      There are a lot of factors in your question since there may be other fees not mentioned, but lets take a look at just the basic question. Is option A or Option B better? First you must determine the full cost of the car which in your example is $21,000+6%*21000=$22,260

      Next figure out the total financed for each option (assumes you apply the cash back as a down payment):
      Option A: $22,260 – $1,000 – $2,000 = $19,260
      Option B: $22,260 – $ 2,000 = $20,260

      Now you can use any loan schedule calculator to figure your monthly payment and interest. I typically use bankrate or edmunds or just google car loan calculator.
      Option A @ 4.5% interest: payment = $572.93 total interest $1,365.33
      Option B @ .9% interest: payment = $542.46 total interest $268.40

      Option B is clearly the better choice based on the limited details. In fact, it is almost always better to go with the low interest rate option as banks will almost never give a bigger rebate than the savings on interest.

      Remember, there are lots of factors that can change the results and every circumstance is different. There are thousands of tools to use, lots of resources at your local banks, and for certainty you can always talk to a certified financial planner. Good Luck, you are doing the right thing by asking the questions above.

  4. ReplyGina

    Help please!! I’m going back to talk to the dealership tomorrow. I was looking to get a 2015 honda civic 4Dr sedan se. The price tag on the car is 20,000. They want 406 per month for 72 months @ 9% interest rate (I HAVE BAD CREDIT) my mom made it 9% if she cosigns, where as BY MY SELF the interest rate would 28%!!…what do I tell the car salesman?? I was hoping 350 for 60 months would make more sense. But honestly I don’t know how interest rates work and how it makes the car total price go up? What’s the max price I should get this car for with 9% interest? Thanks in advance!


    1. Author
      ReplyBetterValue

      Hello Gina,
      That rate seems high, 9% at 72 Months should be around $360 before taxes and any other fees. The best thing I would suggest is to not buy the car today until you have the necessary facts. First, go to a site like cars direct and price out your exact model and color. They should give you a much better price than the dealer and they will be transparent with the fees. At that point you have two options, if the price is lower you can choose to buy through them or you can take the offer back to the dealer and buy from them. As far as interest rates, don’t worry how they work, just use a site like bankrate loan calculator to estimate how much you payment would be. You just need the amount financed (total car price – amount put down – rebates + taxes). They make a mobile app that you can use at the dealer to check rates as you price out the car.

      With poor credit, I highly suggest not buying a new car and one that is two or three years old. The reason is that you will get a far better deal and cars last a lot longer these days. In addition, you will have a lower monthly payment and will be able to establish credit more easily.

      Good luck, FBV

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