How to Calculate the Interest Rate on a Car Loan | John Eagle Acura

How to Calculate Interest on a Car Loan

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Houston drivers in the market for a new vehicle may consider taking out an auto loan to supplement their car-buying budget. If you are opting for a car loan, you’re probably wondering how to calculate auto loan interest rates. In the following guide, you’ll find helpful information regarding this question, presented by our knowledgeable John Eagle Acura finance team. Should you find yourself with more questions, don’t hesitate to contact us today. 

What is an Interest Rate?

Here’s a quick run-down of interest rates in regards to auto loans. An interest rate can be understood as a fee you pay to the lender for allowing you to borrow the money. Until you pay the car off with incremental payments, the car is owned by the dealer or lender. Learn how to figure interest on a car loan based on multiple factors like: 

  • Principal Amount: This is the amount you request to borrow from the lender.
  • Loan Term: This is the amount of time within which you will pay off your loan. Note that short-term loans with higher monthly payments will cost less over time than long term-loans with lower monthly payments. Car loans typically range between 24 and 72 months
  • Repayment Schedule: While most car loan payments are set to be paid monthly, you could save money in the long run thanks to compound interest when you post payments more frequently.
  • Repayment Amount: This is the amount set to determine what portion of your payments go toward the interest rate, and how much goes toward making a dent in the principal amount. 
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More About Calculating Auto Loan Interest

There are a few more points to consider when determining how to calculate interest on a car loan. Your credit score, location, car value, mileage, and whether the vehicle is new or used can all also influence your final interest rate. If you need guidance with this part of the car buying process, our finance team is happy to connect you with our preferred lenders or you can use our handy car finance calculator. 

Learn More About Financing at John Eagle Acura

If you’re a hopeful Sugarland car-buyer excited about bringing home a new vehicle like the alluring Acura MDX, our John Eagle Acura finance team can help make that hope a reality. In addition to auto loans, you can consider financing, leasing, used vehicles, and even certified pre-owned vehicle options. Those interested in current new vehicle specials should stop by our dealership today to talk to our team and browse our impressive inventory!

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