How to Calculate the Percentage Rate When Buying a Car

It's no secret that car dealerships make money selling cars, but the biggest profit is usually not in the sale of the car itself but in the financing. A common sales tactic of car dealers is to provide you with an out-of-pocket amount and a monthly payment for the car you're interested in buying with the interest rate conveniently left out of the equation. Many buyers sign on the bottom line as long as they can afford the monthly note without realizing that note includes an interest rate far above what they should be charged.

Instructions

1

Negotiate a price on the car you're interested in and write down the monthly payment information and term of the loan provided by the finance manager.

2

Ask the finance manager directly for an interest rate on the loan and note that as well.

3

Do not purchase the car during your visit. Return home instead to do some research.

4

Access the Internet at home and find a website that will compute the interest rate charged for you by analyzing the total amount of the loan and the monthly payments. You can find websites providing those calculators for free.

5

Input the total amount to be financed, the monthly payment and the term of the loan into the calculator. The calculator will return the interest rate on the loan.

6

Use the interest rate calculated to contact alternative financing options to see if you can gain a lower rate.