Buying a new car is an exciting experience. However, determining how much your monthly payments will be can cause some hesitation. When you’re considering a $20,000 car loan, it’s important to understand all the factors that go into calculating your monthly payment amount. In this comprehensive guide, we’ll walk through the key details you need to estimate your $20k car loan payment.
What Impacts Your Monthly Car Payment?
When estimating your monthly payment for a $20,000 car loan, there are a few key pieces of information you need:
- Loan amount – This is the amount you plan to borrow to pay for the car. For this example, we are using $20,000.
- Interest rate – Also called APR, this is the percentage rate your lender will charge for the loan. Rates vary based on your credit, the lender, loan term, etc.
- Loan term – The number of months you will take to repay the loan. Common terms are 36, 48, 60 or 72 months.
These core factors allow you to use a car loan calculator to estimate your monthly payment But there are a few other things that can impact the payment amount as well
- Down payment – Putting money down upfront lowers the amount you need to borrow. This reduces your monthly payments.
- Trade-in value – The value you get for trading in your old car also lowers the amount you need to borrow.
- Taxes & fees – Sales tax and title/registration fees may be included in your loan amount.
Now let’s walk through some examples to see how much a $20k car payment might be
Estimating a 36-Month $20k Car Loan Payment
For a quick loan over 36 months, let’s assume:
- Loan amount: $20,000
- Interest rate: 5%
- Loan term: 36 months
Using an auto loan calculator this equals a monthly payment of about $587.
Over the 36 month term, you would pay about $2,114 in interest charges. Your total repayment would be $21,114.
Estimating a 60-Month $20k Car Loan Payment
For a longer 60 month term, let’s assume:
- Loan amount: $20,000
- Interest rate: 5%
- Loan term: 60 months
The monthly payment decreases to around $377.
But you pay more interest over the life of the loan – about $2,646. Your total repayment would be $22,646.
How Down Payment & Trade-In Reduce $20k Payment
Adding a down payment or trade-in value decreases the amount you need to borrow. For example:
- Vehicle price: $20,000
- Down payment: $4,000 (20%)
- Trade-in value: $3,000
- Amount borrowed: $13,000
With a 60 month term at 5% interest, the monthly payment drops to around $252. That’s $125 less per month than without the down payment and trade-in credits!
Should You Get Pre-Approved for a $20k Car Loan?
Before visiting dealerships, it’s wise to get pre-approved for financing. This allows you to see potential rates and monthly payments based on your credit. It also gives you a backup financing option if the dealer can’t beat the pre-approval terms.
Pre-approval provides estimates, but the final numbers may vary based on the vehicle price, fees, trade-in, etc. Still, it gives you a ballpark to know if a $20k car fits your budget.
Tips for Estimating Your $20k Car Payment
Here are a few final tips when estimating a $20k car loan payment:
- Get pre-approved to see potential rates based on your credit. This gives you a starting point.
- Use an auto loan calculator to experiment with different loan terms, interest rates, down payments etc. to see their impact.
- Don’t forget to factor taxes/fees into your loan amount. They may be paid upfront or included in the loan.
- Consider a larger down payment and shorter loan term to reduce interest charges.
- Shop around with multiple lenders to try and find the best rates. Credit unions often have good financing deals.
Buying a $20k car can be affordable with the right loan terms and monthly payment. Hopefully this guide gives you a great starting point for estimating your $20k car payment and setting a budget. With some upfront research, you can feel confident you’re getting the right car at the right monthly price.
Current Buffalo Auto Loan Rates
Whether you buy new or used, its wise to get pre-approved for a loan before you ever step on a car lot. Go to your bank or credit union and ask the agent if you qualify for a loan and how much. The agent will check your FICO credit score and other obligations and provide you with an amount and interest rate. A FICO score can be between 300 and 850. The higher the score the lower the interest rate you will be offered. People with a bad credit history may pay interest rates that are more than double prime rates. You can also shop for auto loans online if you arent concerned about where your personal information goes. Armed with a pre-approved loan you are now in control and have a choice to go with dealer financing or stick with your bank, whichever rate is lower.
The Internet has Changed Automotive Shopping
Research Before You Shop
After you have determined the car you want to buy, go to Edmunds.com to find the invoice price. Do not shop without this information in hand. Its your leverage in the negotiating process. If you dont have this piece of information, the dealer will work from the MSRP which is a much higher price. Consider MSRP as retail price and invoice price as dealer cost.
Never pay higher than invoice price. And dont worry, the dealer still makes a profit. There is something called “holdback” which the manufacturer gives the dealer for each vehicle. Its usually 2-3 % which they receive quarterly. At times the manufacturer also offers dealer incentives for specific models. Need to learn the industry lingo? Check out our car buying glossary.
If you have looked ahead and planned your purchase, note that some times of the year are better than others to buy a car. Salesmen work on commission and have monthly, quarterly and yearly goals to meet. So buying at the end of one of these periods can save you money, especially if the salesman hasnt hit his quota.
Get a Free Online Quote
You can shop online and get instant automobile quotes at sites like CarsDirect and TrueCar. If you are not comfortable buying online you can always use their quotes to see if the traditional dealer will match the price. After the Covid-19 crisis many shoppers have preferred to buy online instead of haggling in showrooms. Some industry analysts expect the shift to stick after the crisis has passed. Online automotive shopping services Vroom and Carvana were recently valued at over $5 billion and $22 billion respectively, outpacing the values of traditional offline dealerships like Auto Nation and CarMax.
If you have made a decision on the exact vehicle you want, visiting the dealership late in the day may work to your advantage because everyone is eager to go home. Aside from the information we provide here, you may want to read some personal stories of sale negotiations to better visualize and prepare yourself:
- “How to Negotiate for a Used Car” – The Art of Manliness
- The “Four-Square” Technique that Dealers Use, and How to Beat It – The Consumerist
- One guys trade-in value dispute with a dealership after using TrueCar – also from The Consumerist
How Much Car Can You Really Afford? (By Salary)
FAQ
What is the monthly payment on a 20k loan?
What credit score do I need to buy a $20,000 car?
There is no minimum credit score required to buy a car, but most lenders have minimum requirements for financing. Most borrowers need a FICO score of at least 661 to get a competitive rate on an auto loan.
How much is the payment on a $25,000 car?
How much money should I have for a 20k car?
So, if you’re interested in a $20,000 car, you would put 20% down, or $4,000. Your loan amount would then be $16,000, and with an interest rate of 4%, your monthly payment on a 4-year loan would be about $361. Under the 20/4/10 rule, this car is a safe purchase as long as you make more than $3,610 per month.