Car Loan Interest Rates Explained (For Beginners)

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Auto loan interest explained (for beginners).
Check out LightStream Loans if you're looking to buy or refinance: bit.ly/auto_loans_ls
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Car loan interest can be very expensive or relatively cheap depending on your terms and the rate you qualify for. You really want to pay attention to how much your borrowing, the interest rate and the length of the loan to determine how much interest your willing to pay on the car loan. You can easily lower your car payment if you extend the length of the loan, but you'll pay more interest on longer loans. So if you qualify for a high interest rate, try to refinance as soon as possible and don't take on a long car loan.
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#honestfinance #carbuying

Опубликовано:

30 июл 2024

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Комментарии : 183

@SuperBlossom2011 Год назад

Thanks so much for sharing this knowledge 🙏🏻

@HonestFinance Год назад

You’re welcome

@dopekills5202 Год назад

I was unaware the interest was annual I thought simple meant 1 time this video was tremendously helpful

@HonestFinance Год назад

Glad it helped.

@adiaz1437 14 дней назад

Me too. I was so pissed off when I did my own calculations and the bank told me I’d be paying like $50 more a month than I calculated. I still think it’s bullshit though.

@noone4272 2 года назад

Buying my first car and this is so confusing. I don’t wanna mess this up. Nor end up ruining my credit score nor end up on the collection. I haven’t brought it yet.

@sukhmeenkourgill3708 5 месяцев назад

Thank you so much for the information ✅

@kinglilmeck6776 7 месяцев назад

What is the website or application you’re using ( Loan calculator) ? 3:46

@ryukirito2616 Год назад

You didn’t tell me how to do the math you just said “download a loan calculator “ I came to learn the math!

@harleydad1975 4 месяца назад

😂 for real

@Drewnonymous Месяц назад

Same here! Lol

@MrSamPhoenix 23 дня назад

Yeah, the math ain’t mathing. I tried plugging in the numbers myself and non of this made sense. I’m not sure that a bank would wait 5 years just to get a measly $2,000.

@trxdude8171 7 дней назад

Yeah this guy is a asshole

@axelsaenz7073 Год назад

I need help with this im confused im 19 about to turn 20 and im looking to get a truck but car loans seem confusing to me some explain to me i would appreciate it.!

@dayday8087 Год назад

Dude you explained this perfectly

@HonestFinance Год назад

Hey thank you!!

@anastasiyayakovenko6547 2 года назад

Thank you for very helpful info. So is it better to get a longer-term loan (72 mo @ 3%) and make extra payments to pay it off sooner or get shorter term loan (60mo @ 2%) and make exact scheduled monthly payments

@HonestFinance 2 года назад

Stick with shorter. You pay most of the interest in the beginning, so shorter is usually better

@Dash-xu8jz 2 года назад

I have a question what if you have a 72 month loan, but instead of paying the recommended amount, you pay twice the amount or more to pay the loan off faster, does that drop the interest rate as well?

@HonestFinance 2 года назад

It won’t drop the rate, but you’ll spend less interest by paying extra

@deathnova9315 2 года назад

Meaning you can't pay less of what you need to pay monthly correct. Even if you payed for ahead of time ?

@HonestFinance 2 года назад

Ya you can’t do that w loans

@yanwynn7806 3 месяца назад

Can you please explain to me about my recent car loan. Total is 31,000 and I down 5,000, so 26,000 left right? I loan 26 grand and my interest rate is 7.45 % for 72 months. How much do I need to pay interest rate? I just simply debited by 26 grand and 7.45% , is that correct or not? Please..?

@keekee8760 2 года назад

Great video, thank you for sharing.

@HonestFinance 2 года назад

You’re welcome. Thanks for watching!!

@edgaracevedo9658 2 года назад

The 0% interest is interesting. I've read the fine print on advertisement where it says 0% interest and in small print it says an administration fee is charged of $15 per thousand borrowed. It might be best to put a nice down payment and/or pay the sales taxes separate so that you don't finance the taxes. I've seen loan calculators that give you the option to see the loan including the sales taxes or keeping them separate.

@HonestFinance 2 года назад

That’s a good point. I’ve never heard of $15 per $1,000 borrowed. That’s a good chunk on an expensive car

@AllAboutPurple 2 года назад

Hmmm great point

@edgaracevedo9658 2 года назад

@@HonestFinance I think it's an adm fee. So for $10K borrowed it's $150 or 30K borrowed $450 total but the 30K would have 0% interest and just be divided by the months of loan.They probably made you pay it upfront along with the title, registration etc. I've only noticed it on Ford 0% Finance Programs in small very small print at bottom of the offer.

@HonestFinance 2 года назад

That’s good to know. Thank you for the insights

@sendeth Год назад

Thats the trick that places like Aarons uses. They don't charge "interest", they charge "lease fees" which is worse. The lump some is applied up front and the equivalent rates can be hundreds of percent. Shady and misleading.

@AllAboutPurple 2 года назад

Another great video!

@HonestFinance 2 года назад

Thank you

@mikemalone6862 Год назад

Thanks jason! Just subscribed.

@HonestFinance Год назад

You’re welcome . Glad the video helped

@larryjoyjoy 9 месяцев назад

hello sir i want to buy a and the financed everything is 45000 interest rate is 8 percent how much is my monthly payment for 84 months

@jasminecontreras7341 Год назад

Just found out that after my collision my car was deemed a total loss. I was devastated about it until I analyzed my monthly payment which was $409 a month for 6 years on a $16.5k car with a 21% apr so I was paying $348 towards interest and $61 towards the principal. $12.9k in interest in the life of the loan. Suddenly I’m not so upset about my car getting totaled 😳😂 I definitely got taken advantage of by the car salesman. I guess everything happens for a reason right? I love learning.

@amandaburleson2035 Год назад

21% OMG. hahhaahha you dont have a husband do you lol, its ok be a strong independant women, you dont need no man. now you will learn in the future. (:

@jasminecontreras7341 Год назад

@@amandaburleson2035 good one 😂 no I don’t have a husband I went to the dealer with my boyfriend though which is almost as bad 🙈 We’re still young and learning though. It’s funny because if I were you I would’ve read my comment and assumed I was an independent woman who doesn’t need a man too lol

@jasminecontreras7341 Год назад

@@amandaburleson2035 I think my biggest regret was not going to the dealer with my dad and step dad because they tried to come with me multiple times but I was impatient and didn’t wanna go to multiple dealers trying to find the best deal when that’s exactly what I should’ve done

@amandaburleson2035 Год назад

@@jasminecontreras7341 its ok, one time i let my gf get into a bad used car deal, but that was on her, because she said " i NEED A CAR NOW"!!!! and im like "its a bad deal but ok", when i was taking pictures of her singing the paperwork i felt so bad she was getting ripped off. she got 15% LOL this was years ago when the economy was good. and she got all the extras like warranty and car alarm etc. i told her i wouldnt do that but she did.. . i feel so bad i treated her so bad... but i told myself. well i cant control her... im not her spouse... we broke up 4 years later.

@christopherhernandez3909 Год назад

We’re so proud of you 😇

@AdventureswithQuillen Год назад

Very well explained

@HonestFinance Год назад

Thank you very much

@takishabaker7520 Год назад

Hey, Since the rates have gone up could you still be able to get a interest rate below the so called minimum rate? For auto where I live its 3.99% for new cars. You can credit unions that will beat it by 1%. I guess could I get a 2.99% even though it's 3.99% if you refinance with another bank?

@HonestFinance Год назад

Rates have gone up this year, so the best will be higher. I’d go w a credit union because they’re typically the best

@mcamp467 12 дней назад

Thanks!

@andrewrogers1360 5 месяцев назад

I’m still confused on how the math works out. If you finance a car and end up borrowing 25,000 with a 3% APR over the course of 60months…why aren’t you paying roughly $430 a month? 3% of 25,000 is $750. Why arent you paying off a total of 25,750 over 60 months? Where is your $1953 coming from? Like that’s not even close to 3%. If anything that’s 7.8%. What math entails this “3%” interest

@ashleysmashley444 2 месяца назад

In the beginning of the video he says Interest is applied annually. So from my understanding that means 3% interest of the balance is applied every year, not 3% of the total loan

@andrewrogers1360 2 месяца назад

So in my example is that $750 every year? I know the price of the car will slowly decline, so you won’t be paying as much but, are you paying 3% of the cars value in interest every year?? If so fuck you banks

@donaldngo2871 2 года назад

Hi there, I have a question if you can please help me answer it, so I just purchased my vehicle after leasing it for 35 months, and decided to finance it for 60 months with a 4.60% interest rate. If I decided to pay my entire amount off, does that mean I will also be paying all that interest charges for the next 60 months that the vehicle is financed for?

@HonestFinance 2 года назад

You only pay interest on what you owe, so if you pay it off early you won’t pay any extra interest

@dontbefooledbyjumla7869 Год назад

@@HonestFinance is it the case with all banks?

@HonestFinance Год назад

All car loans work the same way. You only pay interest on what you owe, so if you pay it off early, the interest will stop accumulating

@dontbefooledbyjumla7869 Год назад

@@HonestFinance thank you for clarifying. I am taking a loan now and interest is 8.5😭

@HonestFinance Год назад

You’re okay. Just refinance once your credit score goes up a bit

@guadalupegonzalez7160 Год назад

I have a question, actually I have a loan of around 8500 dollars and the interest of 14%, can I put like first payment a big amount of money like 5k so it will be less or no in the future? What you recommend

@HonestFinance Год назад

Yes, but call the bank and make sure it’s going towards principal. $5k will save a lot in interest

@3xinarow990 3 месяца назад

What loan calculator did you use?

@Daissweetest Год назад

Thank you

@HonestFinance Год назад

You’re welcome

@MarioFlores-ki9ew Месяц назад

are all car loans the same? I spoke with caravan and they said the interest was on the whole amount

@JohnPaul-ol5zl Год назад

Jason, good video. I only have two questions: 1) Is the Fixed Annual Interest Rate the same as what is referred to as APR (Annual Percentage Rate) ??? 2) I ask the above question because I have an auto loan ($30,480 for 60 Months) where the only rate shown on the paperwork is the APR (7.94). I use that rate to plug into your formula and get $617.14 as the monthly payment. Yet the paperwork of the loan shows the amount as $619.18, which is $2.04 difference (greater). Do you or anyone seeing this comment-post, know why there is a difference? Thanks, John

@HonestFinance Год назад

Yes the Apr is fixed in your case because it’s a 60 month auto loan. Plug in the exact amount you started w and it should be close. There might be slight differences depending on when they started charging interest

@MountainSalsa Год назад

@leventtezer3357 Год назад

So after each payment you make, the interest rate is calculated again as %3 and divided by the months you owe. Am I getting it right ?

@HonestFinance Год назад

Ya somewhat. Just take how much you currently owe, multiply it by your interest rate, then divide by that by 12. This gives you current interest that you pay monthly

@leventtezer3357 Год назад

🙏🏻

@Junior-fn1ok Год назад

He said “3%” I wish 💀

@viviancoleman8417 14 дней назад

I’ve been at 17% since Jan 2022🤦🏽‍♀️ wish I knew this earlier

@reddog1171 11 месяцев назад

Thanks

@catowomen Год назад

Explained perfectly! thank you sooo much!!!

@HonestFinance Год назад

You’re welcome. Glad it helped

@ChristianAnaya-co2hk 11 месяцев назад

I have a question I got a car loan financed 90,293 at 5.74 Apr for 72 months and on my payments it tell me how much it goes into the principal and how much it goes to interest and about 400$ go on interest which according to my math and the loan calculator it should be around 230$ on interest every payment instead of the 400$ is there a reason why it’s so high or maybe I’m doing my math wrong

@HonestFinance 11 месяцев назад

Something’s off. I’m seeing about $400 for the first year each month in interest. Plug in $90,293 at 5.74% , 6 years in the loan calculator and it’ll run correctly

@User-pp3ih 7 месяцев назад

Did u ever figur it out I was wondering the same

@stg3367 9 месяцев назад

How do i know how much is my interest rate?

@justinzemp1949 2 месяца назад

I am new to many of these terms. More definitions would have been helpful. Maybe make them visible in the corners of the screen

@najim-fx6626 Месяц назад

Monthly payment most of it gos to the interest. Does that mean the interest gonna be paid off before your principal?

@dane6510 Год назад

So apr charges the principal AFTER the down payment right?

@HonestFinance Год назад

Yes. Whatever the loan amount is charged interest

@panko02 Год назад

This is flat rate or effective rate? Car loan is flat rate right? It will work out this way like your example?

@HonestFinance Год назад

I base the math off a fixed rate

@cooleydread9860 Год назад

? if I put down 10'000 on 24'000 how much should monthly payment average

@caststorms2987 Год назад

Bro that all depends on ur credit and how long ur loan will be . Literally this video doesn’t even talk about that ?? Like u even read the title thats the easiest thing to find out the damn final price that the car will cost is whats hard

@davidadams4479 Год назад

I pay a car loan 781.98 a month they only apply 41 .40 to principle and 739 dollars in interest and when I called they told me they charge 19.90 a day interest between payments I was under the assumption it was 26.9 percent annually this is more then a loan shark

@HonestFinance Год назад

I’m sorry. I’d refinance the vehicle ASAP w your local credit union to avoid more interest than necessary

@davidadams4479 Год назад

@@HonestFinance I tried that because the payoff was going to be greater then they wanted to refinance we were denied

@ProdigyBuildingMC Год назад

Is it possible to pay monthly only towards principal and then pay off the interest at the end?

@HonestFinance Год назад

No it doesn’t work like that. You can always pay extra towards principle though

@nhitc6832 6 месяцев назад

no. Every time you make a payment, bank (or lender) will make sure they get their interest first.

@faduma1477 Год назад

What if you have really bad credit or no credit at all & just starting to work on your credit? What would a monthly payment for a $25,000 vehicle look like?

@HonestFinance Год назад

There are too many variables to know the payment (maybe $150-200 at 10% rate), but go through your local credit union for the best rate

@faduma1477 Год назад

@@HonestFinance I can still go through them if I don’t bank with them?

@HonestFinance Год назад

Absolutely. Go with whomever is the most competitive

@faduma1477 Год назад

@@HonestFinance thank you so much!

@adrienchan2097 Год назад

Yes you are paying interest of the loan based on a daily balance. If u have a 6 year loan . Total interest is $1000 if paid minimum Pymt to the end of the loan. If u pay minimum Pymt then at end of 30 months u paid around 750 bucks of interest already and by that time… the last 30 Pymt cost of interest is only $250! Then not worth to pay off at end of 30 months of the 72 interest

@preet4528 4 месяца назад

No words after that😮

@dkillahne 6 месяцев назад

not apy its apr apy is annual percentage yield this refers to interest you receive including compounding factor

@justinzemp1949 2 месяца назад

I caught that too

@scott.j1 9 месяцев назад

i just got my first car and financed with Toyota Financial.. after watching this vid, I see how much better it is to make a bigger down payment and go with a 4 year loan instead of a 5 year loan.. Can I go back to Toyota and re-finance? I want to put more down payment and switch to a 4 year instead of 5.

@mayvue3075 3 месяца назад

Do you know if Toyota accept outside finance? Was applying for the finance application a standard procedure? Because that was what my husband was told.

@adolfochaparroalvarez2814 8 дней назад

My cuestion is how i can calculate how much its going on interest on each payment, what is the Equation? 😅

@rashedahamed8415 2 года назад

Add another video

@jesusgonzalezmachado 2 года назад

Yoo I'ma about to refinance my car rn my interest is at 13.94% an got a 475$ monthly payment jst got a offer for 6.24% and 401$ a month 60 month 19.000$ is the amount I owe I got a 2013 g37 with 69000 miles my fico is 705 u think that's a good deal

@HonestFinance 2 года назад

Yes it’s a much better deal. 6% is so much better than 14%. And when your credit is higher, the best rates are about 3% right now through credit unions.

@HonestFinance 2 года назад

I’d probably refinance again in a year and try for 3%

@jesusgonzalezmachado 2 года назад

Ok sounds good how many times can I refinance the same car

@HonestFinance 2 года назад

I don’t think there’s a limit. I’d only do 2 at most (but that’s me)

@jesusgonzalezmachado 2 года назад

Yea 2 is perfect thanks for that advice great help bro

@Erlov71 Год назад

Big down payment, longer loan with lower monthly payment but pay alot more every month? Smart or not smart?

@HonestFinance Год назад

That’s great. A lower payment is safer if you run into problems

@sergiovasquez6654 Год назад

Trusted lenders

@Ramsey-wk1ml Год назад

They want me to pay 10percent interest rate at the dealer gonna go to a credit union and hopefully get it down

@HonestFinance Год назад

You probably will. Good call

@trxdude8171 7 дней назад

So you said this was easy to figure out. But you have to use a loan calculator lol. 😂

@mauricioscottcallejas 2 года назад

Bx1

@MrSamPhoenix 23 дня назад

The math ain’t mathing. I tried plugging in the numbers myself and non of this made sense. I’m not sure that a bank would wait 5 years just to get a measly $2,000.

@jesusmarin95 Год назад

I got a car loan and and I just realized it's veriable rate , I got wrecked

@HonestFinance Год назад

It’s okay. Just refinance w your local credit union asap

@jaywavy5734 Год назад

These numbers literally is my loan 😂 25K with 3% interest rate and my car note really $449 I pay $500 tho..

@HonestFinance Год назад

That’s funny. Spot on numbers I guess :)

@mrblutifultm Год назад

This is not correct because cars do not come with an interest rate they come with an APR you don't pay a 3% for 25000 you pay 3% APR every year

@dayday1016 Год назад

What determines your interest rate?

@HonestFinance Год назад

Mainly your credit score and income

@mb37206 Год назад

$25k X 3% is $750.. Interest/ Apr= $750... Multiply the total interest by the years of contract. $750 X 5= $3750 The TOTAL price you pay in the end is $28,750... which is great! Only paying an extra $3k on a $25000 car... That calculator is a scam tho! 👆🏾👆🏾 this is how you calculate what you are paying versus how much the car is priced! when people get 18% interest, that $15k car ends up costing you $30k

@HonestFinance Год назад

As you pay down the car, you pay less interest , so multiplying by years is more than you’ll actually pay

@mariogonzalez463 7 месяцев назад

@@HonestFinance so what equation do you use ? I was thinking like buddy up there as well .

@juliusajeh5555 Год назад

If you’re going to advertise an app called loan! Just do that!!! don’t act like you know how to calculate interest rate for car loan, you end up wasting people’s time!

@xFitzMan91x 4 месяца назад

Oh my god, I'm in my 30s and I STILL don't get interest and how it works! It seems so fucking complicated! You know what, loans would be much easier to understand if there was no interest lol I'm just too stupid 😔

@mattwilson2433 3 месяца назад

its APR, not APY

@Fiveandime Год назад

RIght its a bunch of double talk... got it

@g4l.baller 2 года назад

Jesus Christ loves you so much that he died on the cross for you

@SuperMz0051 2 года назад

Why would I kill my son for the sins of others? I am sure GOD IS JUST

@jo5e9h016 Год назад

@@SuperMz0051 you arent god bro you aint killing anyone

@agnosticpatriot Год назад

He could have done better not dying and living forever, atleast we could make sure he is the true god. Religion is a precious and a private matter, stop humiliating your religion like radical muslins..

@agnosticpatriot Год назад

@@jo5e9h016 he asked something you just said something irrelevant.. Whats going on

@agnosticpatriot Год назад

@@shaneh5585 its only your truth, rest of us feel different. You could be delusional, we are not. We have a good life to live.

@HonestFinance 2 года назад

Enjoy the video! Here's a playlist to watch more car buying videos if you're interested: ru-vid.com/video/%D0%B2%D0%B8%D0%B4%D0%B5%D0%BE-rwOcAHTH4Os.html

@caducoppini Год назад

You’re so handsome

@MrResaleInc Год назад

it is not explained you just reference a loan calculator on a website?? lol

@jamesobrien4013 Год назад

Ahhhh....of course....a video on how to use Google

@alexanderthegreat1776 Год назад

Good god! You want the lowest interest rate you can get 🤦🏻‍♂️ I just wasted 7 minutes of my life!

@GA-yv3zw 7 месяцев назад

this is a useless video, it doesn't even answer the question of how these numbers work!

@caststorms2987 Год назад

How much am i looking to pay for a $13k suv with a down payment of 3500 and my score is above 750 after a 32 month loan? i need help to realize what the final price of the car will be from this 3 yr loan its stressing not knowing the sales tax before even buying the vehicle

@josearellano3670 Год назад

Use a loan calculator like he said & just search up the tax rate in the county you buy the vehicle in

@caststorms2987 Год назад

@@josearellano3670 but doesn’t the tax rate all depend on the down payment and cost of the car so its always the same percentage tax rate??

@HonestFinance Год назад

The tax rate will be charged on the car and any add-on’s (like extended warranty). A down payment won’t lessen the tax due, but a trade in will

@caststorms2987 Год назад

@@HonestFinance so ur saying no matter if i put 2000 down or 4000 down with the same price as i said $13k then the interest won’t change based on the down payment i give? And just on my credit and loan term

@HonestFinance Год назад

The interest charges will be lower w more down (Sorry for the confusion), and the rate might be lower w more down too, but it’s mostly based on your credit score. But if your the car is $13,000 and you put down $13,000 , you’ll still need to pay taxes based on a $13k car. However, the more you put down, the less you’ll pay in interest over the life of the loan. Hope this makes sense