How do I calculate a financing charge on a car loan?

I’m getting a loan and I was reading the fine print. It mentioned something about finance charges and showed an amount, but I’m not sure what these charges are. How can I calculate the financing charge on my car loan?

Answer
Finance charges include interest, fees, and taxes rolled into your car loan. To determine your finance charges, multiply your monthly payments by the number of payments in your loan and subtract this amount from the principal of the loan (the total amount borrowed).
For example, let’s say your monthly payment on a 48-month loan is $450. Following the formula above, you should multiply these two numbers together to get $21,600. If you borrowed $24,000 for the car (the principal), subtract $21,600 from $24,000 to get $2,400. So in this case, your finance charges are $2,400, which includes interest paid, taxes, and fees.
If you’re budgeting for your finance charges, do the same for your car insurance. Your lender likely requires full coverage car insurance on your financed vehicle, which can get pricey if you don’t shop around. Try using the number-one-rated car insurance app, Jerry. As a licensed broker, Jerry helps you find and compare quotes from over 50 top providers in minutes. When you find a better rate, Jerry can help you buy your new coverage and even cancel your old policy!
Eric Schad
Answered on Dec 07, 2021
Eric Schad has been a freelance writer for nearly a decade, as well as an SEO specialist and editor for the past five years. Before getting behind the keyboard, he worked in the finance and music industries (the perfect combo). With a wide array of professional and personal experiences, he’s developed a knack for tone and branding across many different verticals. Away from the computer, Schad is a blues guitar shredder, crazed sports fan, and always down for a spontaneous trip anywhere around the globe.
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