The Figures You Need To Know When Buying A Car

June 20, 2009

There are many numbers you need to go over when you buy a car. If you are not a financial guru or if you do not buy cars on a regular basis then these numbers can cause a lot of confusion.

Knowing the basic numbers that go into your purchase of an automobile can help you to assess the prospective car loan that you have before you and can help you to plan for your future as you pay off this loan, especially during the current financial hardship.

The Basic Price Of The Car

This begins with the actual sale price of the car. The sale price of the car is just the amount of money that you have agreed to pay for the car. This price is pretty straightforward.

Next comes the down payment. The down payment is the amount that you pay before receiving the car and will affect your subsequent payments. In general, the more of a down payment you can afford the better it will be for you. A larger down payment will mean a smaller loan amount and smaller payments to pay off that loan.

You will also want to factor in the trade-in value of the car that you plan to trade in, if this applies in your situation. This amount is usually just put toward the amount of the down payment. Depending on the value of your trade-in, this could go a long way to giving you a sizeable down payment.

The Loan Numbers

You begin with the actual amount of the loan. This is simply the total amount that you plan to borrow to cover the cost of the car. A stated earlier, it will vary depending on the down payment.

Your annual percentage rate or APR is the percentage of the total amount that you borrowed in the form of the loan that is charged as interest on a yearly basis.

Then comes your monthly payment. This is crucial. You want to know exactly how much you will have to pay each month, when it will have to be paid by, and how it must be paid. This is the amount that you will need to be able to afford each month. Make sure it is well within your means and will stay that way.

The payment period is the length of time over which the payments will be made. This number of months will vary based on your loan. You want to remember that your vehicle will be declining in value as you continue to make these payments over time. Make sure the vehicle will be worth the payments.

The Grand Total

The total cost of your car will end up being all these figured added up. This means the total car cost will include the down payment and all of the monthly payments. This figure will also include the interest from those monthly payments. This will be the total amount that you will end up paying for your car and could be a lot more than the sale price.

There are many figures you need to be aware of when you buy a car. This is a large investment, and you do not want to enter into it with any confusion. By calculating and confirming these numbers one by one, you can make a wise choice when you buy a car and avoid surprises.