If you’re planning to take out an auto loan for your next new vehicle in Corona, you should expect to be charged interest. With that said, you may be wondering how much your monthly payments and total amount owed will be impacted by your interest rate. To learn more, join BMW of Murrieta as we explore how interest rates are determined and how to calculate interest rate on a car loan, below.
Before we dive deep into how to calculate auto loan interest, we’ll need to look further into what interest is and how your interest rate is arrived at. When you purchase a car on credit, your lender technically owns your vehicle until it’s been fully paid off. You can think of your interest rate as a fee you pay the lender for borrowing their money to buy your vehicle. The interest rate you’re quoted is determined by a number of factors, including:
When you’re calculating auto loan interest for your first payment, use this simple calculation:
Note: Following this formula gives you the amount of interest you’ll pay the first month.
Once you start making auto loan payments, you’ll want to calculate your new balance to figure out the interest you’ll pay in the coming months. Here’s how to calculate the interest on a car loan moving forward:
Human error and the need to round your answer up or down means you won’t have an exact calculation every time you work it out, but you can consider this a reliable basis for how to figure interest on a car loan. This will help you find a vehicle that works with your budget, creating a simpler car-buying process for Riverside shoppers.
We understand if you’re feeling a bit overwhelmed! If you have lingering questions surrounding how to calculate the interest rate on a car, the friendly finance team at BMW of Murrieta is here to assist. When you visit our dealership near Ontario, our finance specialists will walk you through the process, step-by-step. You may also find our monthly payment calculator to be of help, and if you’d like, we invite you to apply for BMW financing online.
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