But first, know how car financing works

A car is one of the biggest investments a person makes in his life and a car finance calculator can be a valuable help. After finding the car of your dreams through a car finder, you must know how much you’ll need to make that dream come true. That’s where a car finance calculator can help you but it’s only as good as what you feed into it. Therefore it’s best to know the nitty gritty of car financing before you switch on the car finance calculator.

If you’re like most people, you’ll need to finance the purchase of the car and work out a car loan with the dealer or a bank. Dealers either finance the loan with their own money or work in tandem with a bank. Either way, all parties work on a commission basis. The higher the loan, the more they make. The extras like undercoating, alarms and special insurance are usually not part of the car’s purchase price so they’ll try to sell you on getting those, too. The first thing you have to input in your car finance calculator is the TOTAL amount of the loan.

The next thing you’ll need to punch into the car finance calculator is the interest rate. Sometimes, you’re locked into the financing scheme of the dealer. If you’re not, shop around for competitive interest rates. Your company’s employee loan association might offer lower rates. If you have other policies with an insurance company, they might give you better terms. Remember that longer loans get higher rates, and the newer the car the lower the rates.

Figure in the special deals. Offers like 0% interest often have a catch. Most of the time, the lower the interest, the shorter the credit term. This means that your monthly payments may be higher than you anticipated. At other times, a 0% interest limits you to getting what’s available on the floor and you’ll have to forego your choice of color or other “free” accessories. Also, by choosing the low interest rate, you are not entitled to any cash rebate. Use your car finance calculator to figure out whether you should take the deal or look for financing elsewhere.

Down payment matters. Many buyers gloss over the amount of the down payment. Remember that your down payment is cash in hand. If you kept part of it in a bank account, it would earn money even if you would have to pay higher monthly amortizations. Use a car finance calculator to compare different combinations of down payment versus monthly payments in order to arrive at a mix that fits your pocket best.