How do I calculate the interest rate on a car loan?

I need to purchase a car. I’ve been contemplating if I want to buy one I can pay for up front with cash or if I want to take out a car loan to buy something nicer. The decision boils down to whether or not I will be approved for a low interest rate. Is there a way to estimate what the interest would be on a car loan?

Answer
That’s certainly a tough decision to make, but you’ve asked a great question!
To calculate the interest rate on a car loan, you’ll need to submit a loan application. It is difficult to estimate otherwise, as lenders have a complex system for determining interest rates that relies on many factors, including:
  • Credit score and history
  • Income
  • Debt-to-income ratio
  • Employment status and history
  • Loan amount
  • Term length
  • Vehicle details
If you want to know the interest rate you’ll be offered before beginning to shop for a vehicle, you can apply to be preapproved for a loan. Preapproval is non-binding, but the lender will give you an idea of the interest rate and loan amount for which you qualify, making the budgeting and decision process much easier.
To ensure you’re making an informed decision, you should shop around and compare multiple offers to find the most favorable loan agreement. Consider applying for preapproval through:
  • Local and national banks
  • Credit unions
  • Dealerships
  • Online lenders
Regardless of how you proceed, you’ll need to insure the new vehicle, and there’s no easier way to compare quotes and purchase a new car insurance policy than using Jerry.
After providing you with a comprehensive analysis of the best policies across more than 50 providers, Jerry will handle the phone calls, paperwork, and renewals for your top pick so that you don’t have to. The average Jerry user saves $879 a year on car insurance.
Jack Walsh
Answered on Dec 15, 2021
Jack is an insurance specialist and writer living in Buffalo, New York. He has a BA from Union College and worked as an insurance agent with Jerry before joining our content team. He enjoys using data and research to break down complex subjects and convey a story. In his spare time, Jack enjoys cycling, cooking, and exploring Buffalo’s beautiful waterfront.
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