An Auto Loan Calculator Could Lead You Astray, and Here’s Why

You’re credit challenged in some fashion. It means different things to different people. It’s a run of late payments for some people, collection agencies calling for others. It may be a bankruptcy or an ex that took you to the cleaners in a divorce settlement. Or, you might have no credit of your own. Yet, when you’re shopping for a car, an auto loan calculator is the first tool that lenders offer. That’s a problem.

Why An Auto Loan Calculator Isn’t Always Good

Wondering what I mean? Here’s the problem: trying to determine which car you can afford isn’t something an auto loan calculator can do. All it does is spit out a calculation based on the price, term, length, and interest rate you provide. And when you’re plugging those numbers into the calculator, do you know if they are accurate?

Problem 1: The Price Isn’t Right

When you enter the sale price into the auto loan calculator, there’s a tendency as humans to be optimistic. You expect you can negotiate the sale price down a little, and you use that number to determine if you can afford the car. It’s not a good habit, and you could find yourself disappointed you can’t buy the car. Worse yet, you could end up buying the car for more than you can afford! As well, an auto loan calculator often won’t take taxes and dealer fees into consideration. The result is a payment that is pre-tax, and you’ll be adding up to 15% more when you try to get financing.

Problem 2: What Interest Rate Do You Qualify For?

Do you have perfect credit? Most calculators account for someone with good credit for their default interest rates. If you have a super-prime credit score, it could be less. If your score is below the ‘good’ rating, you’re likely paying a higher interest rate than the default set in the auto loan calculator. You might be calculating the payments all wrong. Even a couple points higher in interest can be significant on a car payment.  

Problem 3: Is the Car Eligible for the Term You Want?

When you’re shopping for a used car especially, there are limitations for the term length. It’s according to criteria from individual lenders – the dealer might not even know the exact length a car is eligible for. Older cars have shorter financing terms, like 5, 4, or even 3 years. Some new cars can stretch up to 84 or even 96 months! Do you know what the car you want is eligible for? You might be playing a guessing game with the auto loan calculator, setting yourself up for disappointment.   Instead of playing around with an auto loan calculator that will never be quite accurate, get help from a dealership that cares. CarUp KC is part of the Wolfe Auto Group, a trusted and knowledgeable name in Missouri. Let us help you get into a car that you love and at a price that you can afford. Call us or visit today!

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