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How are car loans calculated?
I’ve been shopping around for a new vehicle and know I’ll need to take out a loan. I’ve never had a loan before. How are car loans calculated?
Jack Walsh · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
Shopping for a new vehicle is exciting, but the financial side of it can be incredibly confusing, especially when it comes to
car loans
.The way car loans are calculated can be complicated. Lenders rely on both your personal information and history as a borrower, as well as your unique situation.
The following (and more) may be taken into consideration:
- Credit score
- Credit history
- Employment status
- Income
- Debt-to-income ratio
And here’s what lenders may use when calculating your loan amount:
- Vehicle price
- Sales tax and dealer fees
- Trade-in value (if applicable)
- Down payment (if applicable)
- Rebates, discounts, and incentives
- Car loan term length
The above are plugged into complex formulas. Not all lenders are the same, so you should shop around and compare loan offers from multiple lenders to find the most favorable terms.
Once you’ve been approved for a loan and have chosen your new car, you’ll need
car insurance
before driving it home. To find the best coverage and rate, you should compare quotes from multiple companies, as well.If you’d rather leave the hard work of gathering quotes to someone else, use
Jerry
. The Jerry app can collect quotes from 50+ top insurance companies, like Travelers, Nationwide, and Progressive, in seconds! You can make changes at any time, and if you ever have any questions, agents are just a text away! They even help cancel your old policy once you’ve made your pick.MORE: What to do after buying a new car
View full answer
- Gregory R.
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Jerry partners with more than 50 insurance companies, but our content is independently researched, written, and fact-checked by our team of editors and agents. We aren’t paid for reviews or other content.
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