Many people make the mistake of purchasing a car they cannot afford. In fact, according to Edmunds data in 2010, close to 22 percent of the U.S. population owed about $4000 on their trade in.

What factors influenced consumers to make such hasty decisions when purchasing a car? Well, many people blame the auto industry for making overly persuasive ads that aired on television and the radio. Many of these ads created the illusion that just about anyone could afford the new car of their dreams. All you needed to do was show up at the car dealership and be approved for a car loan. However, it was all too good to be true, and many people learned after it was too late that they had made a poor financial decision.

So how do you make sure that you don’t become one of these statistics? You need to know what type of car you can afford. One tool that can help you determine this is a vehicle loan calculator. Vehicle loan calculators help you determine how much money you need upfront and how much your monthly car payment will be. This way you don’t find yourself struggling to make car payments and end up owing more than the car is worth.

To help you better understand how these automobile calculators work learn what factors they take into account.

What do Online Auto Loan Calculators Compute?

  • Location – Each loan calculator takes into account where you live in the United States. Many use your zip code to determine your taxes and the type of finance rate you receive. Both of these factors influence how much you end up paying for a car.
  • Monthly Payment – This calculation determines if you have enough money to pay your car loan on a monthly basis. Unlike many of the deceiving car advertisements on television and radio, this figure takes into account the cost for the car title, registration fees and other costly expenses. recommends that your car payments do not exceed one-fifth of your net income.
  • Loan Term – It is recommended that you stick to a loan that lasts 60 months, which is 5 years. If you get a loan with a shorter duration your payments will be much higher.
  • Finance Rate – This is the average interest rate that a large percentage of the population who are interested in purchasing vehicles is approved for.
  • Trade In Value – This is the amount of money you get for trading in your car which helps to reduce the total amount you owe upfront. However, you are almost guaranteed to make more money if you sell your car to a private buyer, rather than selling it directly to the car dealership.
  • Money Owed on Trade-In – This determines how much money you still owe on your car. According to, you can figure this amount by multiplying the number of remaining payments you have left before the contract ends.
  • Upfront Payment – Lenders require buyers to put more money down than they did a few years ago. Try placing at least 20 percent down. This will reduce the amount of the loan you need to take out and decrease your monthly car payments.
  • Down Payment with Value of Trade-In – This includes the amount of cash you put down, including how much money you get for your trade-in.
  • How Much You Want to Spend – This price range includes what type of cars you have the funds for; otherwise known as the sticker price of the vehicle.

There are many factors that go into auto loan calculators, which is why they prove to be useful to consumers interested in purchasing new or used cars. You can try a variety of loan calculators to get a rough estimate of what type of car you can afford. You can also do your own calculations by hand; however, auto loan calculators help to simplify the process so you can spend more time browsing for the right vehicle instead of computing figures.