If you’re in the hunt for a new car and you don’t plan on paying in full, some consumers get confused on how the car payments work.  It’s important that you know how much you’re going to have to pay per month before you take out that car loan.  A general rule of thumb is that your car payment should be no more than 10% of your take home pay for the month.  For example, if you take home $2,000 a month, don’t spend more than $200 per month on your car payment.

Now, you’re probably wondering how you figure out your car payment.   Calculating this isn’t that hard at all, I’ll show you how to do it:

The first thing you’re going to do is get a few numbers together, you’ll want to know the following -

• The car price – How much does the car cost minus your down payment?
• Loan Term – How long are you going to be taking a loan out for?  Is it going to be 12 months, 24 months, etc?
• Interest Rate – How much is the rate going to be on the loan?  If you don’t know this yet, call up a few companies and figure out what your rate may potentially be.  A ballpark will suffice.
• Down Payment – How much are you going to put down on the car?

Once you get these numbers, you’re going to have a better idea on how much your loan is going to be.  Now, I would love to go into the numbers on how you calculate your interest, etc but instead of doing this, we will visit a website that will do all the dirty work for you.

Hopefully once you fill your information on that calculator, you’ll have a good idea on how much your car payment is going to be.  Make sure that you get a car payment that you can afford.  While, it’s nice to get a car paid in cash, we all know that not everyone is privileged enough to do this.  Once you get that car loan situated, try your best to pay it off as quick as possible because it will be consider “debt” and it’s a lot nicer to pay off a loan instead of having one.