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How much down?
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I want to buy a car, and after taxes and fees, it's going to cost me $24,978. I can get a loan for the car, with a 5-year term and a 4.3% interest rate. I've figured out that I can afford a car payment of $369 per month.
How much does my down payment need to be if I want to buy the car?
This one has two parts.
Part 1: The loan
- Find out the maximum amount I can borrow
- Find out how much I'll have to put down by subtracting the loan amount from the total cost of the car
First things first, make sure the calculator is using 12 Payments per Year.
N: 60 (The car loan is a 5-year loan)
I/YR: 4.3 (The car loan has a 4.3% interest rate)
PV: (This is what I'm trying to find)
PMT: -369 (I can afford $369 per month for a car payment)
FV: 0 (At the end of the loan, the car will be paid off)
The most I can afford to borrow at these terms is $19,889.81.
Part 2: Finding my down payment
The bank will lend me $19,889.81, and the car will cost me $24,978.00, so I'll need to make up the difference, which is $24,978.00 - $19,889.81 = $5,088.19.
What do you think? Should I drop $5K now and pay $369 per month for the next 5 years so I can have a new car? Should I look for a cheaper car? Or should I put even more down so I can have a lower monthly payment? What would you do? Let us know in the comments!