Figuring out how much car is just enough is not difficult nowadays, especially with all of the resources available to consumers. In Australia, consumers only need to go online to find all of the information needed to secure financing for a new vehicle, in addition to details about the different funding sources available. However, there is one tool that can answer all of the questions you might have regarding how much is just enough.
A car loan calculator is one of the best ways to gauge how much car is affordable for your budget. A car loan calculator can do a number of things for the consumer, in addition to helping them decide on a vehicle. These calculators in many ways form the foundation of creating a budget that will allow consumers to comfortably afford a car while paying on existing obligations.
Keep reading to learn how you can start budgeting for your new car using a car loan calculator.
Learn About The Math
In addition to understanding lending in the larger sense, understanding interest rate and how it is calculated is important. Furthermore, understanding the difference between simple interest and other interest calculations can help you get a better idea of your loan amount. Knowing how to calculate the principal balance and the total amount after interest can help you with figuring out the best loan amount for your budget. Finally, understanding how they all work together to give you a monthly payment might be helpful when actually using the calculator.
Take A Look At Your Finances
Before heading to the online calculator, sit down and review your budget. A simple way to figure this out is to list all of your outstanding obligations and expenses, keeping each one in a separate column. Subtract the totals from your income. The leftover income is your disposable income.
This extra amount is what you have available for a loan, but before plugging in your information, be sure to consider bills and expenses outside of the monthly payment. Expenses like insurance, car maintenance, and fuel can add up quickly, so give yourself a cushion to cover these expenses. This cushion will vary depending on the vehicle, but when figuring out how much you have to spend, expect to play around with the figures until they fit within your budget.
Find Your Calculator
Of the many calculators online, consumers can find themselves with a number of options. As stated before, many calculators will figure for simple interest while others will use amortization calculators to provide consumers with a figure. The difference is in the way they are calculated where simple interest yields a payment that is the same until the end of the term while amortized interest is where borrowers pay more in interest at the beginning of the loan and then more on the principal the closer they get to the end of the loan.
Plug In Your Figures
Take some time to browse each of the loans online to see what the current interest rates are and then start looking at car prices. Plug your figures into the calculator. Consumers will need to know the principal (total cost of the car), the interest rate (determined by lender), and the length of the loan (usually given in months or years). The calculator will give you a monthly payment, and this payment will be the basis of your budget.
Drafting A Budget With An Online Calculator
Once you have entered your details into the loan calculator, all you need to is to take the monthly payment amount and add your extras. Research insurance costs, mileage, and maintenance on the make and model of the car you have chosen and then add these figures to your monthly payment. While you will not have to maintain your car monthly, including this figure will give you a sense of how much you potentially might spend in a month. With a budget in place, you can plan for your financial future with confidence and enjoy more control over your income.