Reverse Car Loan Calculator

Calculate How Much Car You Can Afford

The purpose of this calculator is to make it easier to gauge how much you can borrow with a car loan. While you'll need to get preapproved by lenders for firm numbers, getting an estimate can help you make a better choice for your budget.

Here are the details you'll need to provide:

• Desired monthly payment: You can find this by creating a budget and tracking your expenses to determine how much you can afford to pay each month toward an auto loan.
• Desired loan term: This is the length of time over which you expect to repay your loan. Auto loan terms usually range from 36 to 72 months. While it may be tempting to choose the longest term for the lowest monthly payment, make sure you also consider the total interest charges over the life of the loan.
• New or used car: New cars typically qualify for lower interest rates because they're less of a risk for the lender. That said, used cars typically cost less, which can also help keep your payment low.
• Score range: Higher credit scores typically qualify for lower interest rates, which can help you save on your monthly payment or possibly allow you to afford a more expensive vehicle. You can check your FICO^® Score^Θ for free with Experian to get an idea of where your credit health stands and review the average auto loan interest rates by credit score.

Learn more: Latest Auto Loan Rates and Financing

Factors That Affect Your Monthly Car Payment

Lenders determine your loan payment based on several factors, including the following:

• Loan amount: The total amount you borrow will be the sales price of the vehicle plus taxes and fees, minus any down payment you make in cash or with a trade-in. The less you borrow, the lower your payment will be.
• Credit score: The higher your credit score, the better your odds of getting approved for a lower interest rate, which translates to a lower monthly payment.
• Debt-to-income ratio: Lenders will calculate your debt-to-income ratio (DTI) by adding up your total monthly debt payments and dividing the sum by your gross monthly income. A low DTI means you can afford to take on more debt and can result in a lower interest rate and monthly payment.
• Repayment term: Spreading out your monthly payments over a longer repayment term will result in a lower payment amount, albeit with more total interest charges. Longer repayment periods also typically come with higher interest rates because they're riskier for lenders compared to shorter terms.
• Vehicle type: As previously mentioned, newer auto loans usually qualify for lower interest rates. However, the higher price tag may still result in a higher monthly payment.

It's important to note that these factors only influence the amount you can afford to spend on a loan payment. As you assess your options, it's crucial to also keep room in your budget for insurance premiums, fuel and other costs of car ownership.

Learn more: What Is the Total Cost of Owning a Car?

Tips to Save Money When Buying a Car

As you consider your car-buying and financing options, here are some tips to help you maximize your savings on such a significant purchase:

• Opt for a used car. The new versus used debate has positives and negatives on both sides, but if your top priority is a low monthly payment, you'll likely be better off with a used vehicle. Dealers often offer certified preowned vehicles that they've inspected and refurbished, and that may come with low mileage and optional extended warranties.
• Negotiate the car price. Negotiating the price of a car can be as simple as researching the value of the vehicle in question and scouting prices from multiple dealers. Additionally, you may be able to leverage a trade-in and decline dealer add-ons to minimize your costs.
• Shop around for an auto loan. While dealer-arranged financing can be convenient, it could result in a higher interest rate due to dealer compensation. Instead, get preapproved with multiple lenders before you head to the dealership so you can compare your options and get the best possible terms.
• Make a large down payment. It's generally recommended to put 20% down on a new car and 10% down on a used vehicle. However, the more you put down, the less you'll have to pay each month. Just be sure to avoid sacrificing other important savings goals.
• Improve your creditworthiness. Start by checking your FICO^® Score and Experian credit report, then take steps based on what you find to improve your score. You can also lower your DTI by paying off smaller loan and credit card balances. If your score is in poor shape, it may help to add a cosigner to your loan application.

The Bottom Line

A reverse car loan calculator can give you an estimate of how much you can afford to borrow to buy a car. Before you move forward with the car-buying process, however, it's important to understand how your credit and other variables affect your options.

With this knowledge, you can improve your chances of securing a lower monthly payment on an auto loan or borrowing more with the same amount you can afford to spend each month.