Before you visit the dealer
Four things decide what a car loan really costs. Here is each one.
Banks finance 70 to 80 percent of the car's price. The rest is your down payment, paid upfront to the dealer and never part of the loan.
20 to 30%How most banks quote car loans: interest on the full financed amount for the whole term, divided evenly across your payments. The effective rate is higher than the quoted number.
on full amountUsually 12 to 60 months. A longer term means a smaller monthly payment but more total interest.
1 to 5 yearsA one-time fee to register the bank's hold on the car until the loan is fully paid. Budget a few percent of the loan amount on top.
one-time feeQuestions people ask
answered in plain wordsWith the add-on method banks use for auto loans: interest is computed on the full financed amount for the whole term (financed amount times the annual rate times the number of years), added to the principal, and divided evenly across the months. If your quote uses an effective or monthly rest rate, switch to the amortized option instead.