26:["$","$L27",null,{"category":"$28","relatedArticles":[{"id":"cG9zdDoyODYxOQ==","databaseId":28619,"postId":28619,"author":{"node":{"id":"dXNlcjo0OA==","databaseId":48,"userId":48,"avatar":{"url":"https://secure.gravatar.com/avatar/50102d5e35f225d865b5245a2521bb14?s=96&d=mm&r=g","size":96,"__typename":"Avatar"},"description":"Nick Wallace studied Economics at the University of Washington. He enjoys getting people thinking about finances by looking a the numbers. Nick is a freelance journalist and data analyst living in Michigan. He still lends his economic and analytic expertise for SmartAsset's studies.","additionalMeta":{"expertise":null,"__typename":"User_Additionalmeta"},"email":null,"firstName":"Nick","fullName":"Nick Wallace","lastName":"Wallace","name":"Nick Wallace","postCount":{"pageInfo":{"offsetPagination":{"total":112,"__typename":"OffsetPaginationPageInfo"},"__typename":"UserToPostConnectionPageInfo"},"__typename":"UserToPostConnection"},"slug":"nwallace","__typename":"User"},"__typename":"NodeWithAuthorToUserConnectionEdge"},"categories":{"nodes":[{"id":"dGVybTo4Nw==","children":{"nodes":[],"__typename":"CategoryToCategoryConnection"},"databaseId":87,"categoryId":87,"link":"https://smartasset.com/auto/articles","name":"Auto","postCount":{"pageInfo":{"offsetPagination":{"total":15,"__typename":"OffsetPaginationPageInfo"},"__typename":"CategoryToPostConnectionPageInfo"},"__typename":"CategoryToPostConnection"},"slug":"auto","ancestors":null,"parent":null,"__typename":"Category"}],"__typename":"PostToCategoryConnection"},"content":"$29","date":"2015-04-29T10:00:55","excerpt":"

\n","featuredImage":{"id":"cG9zdDoxOTI0NzU=","databaseId":192475,"altText":"The Best Cities for Electric Cars","date":"2023-03-21T02:15:54","fileSize":117968,"mimeType":"image/jpeg","modified":"2023-03-21T02:15:54","sourceUrl":"https://smartasset.com/wp-content/uploads/sites/2/2015/04/5342527965_2aa0db067b_z.jpg","__typename":"MediaItem"},"modified":{"datetime":"2023-3-21","readable":"March 21, 2023"},"multipleBylinesByRole":{"editedBy":null,"reviewedBy":null,"writtenBy":null,"factCheckedBy":null,"secondEditor":null,"hideAuthor":null,"__typename":"Post_Multiplebylinesbyrole"},"adTargetingOverrides":{"fieldGroupName":"adTargetingOverrides","pageGroupNewKey":null,"__typename":"Post_Adtargetingoverrides"},"seo":{"canonical":"https://smartasset.com/auto/the-best-cities-for-electric-cars","metaDesc":"Using data on gas prices, energy costs and other expenses, we found the best places to own an electric car. Topping the list was Atlanta, Georgia...","metaKeywords":"","metaRobotsNofollow":"follow","metaRobotsNoindex":"index","readingTime":8,"title":"Where Do Electric Cars Make Sense? - SmartAsset","__typename":"PostTypeSEO"},"slug":"the-best-cities-for-electric-cars","status":"publish","title":"The Best Cities for Electric Cars","uri":"/auto/the-best-cities-for-electric-cars","tags":{"nodes":[],"__typename":"PostToTagConnection"},"__typename":"Post","adPageGroupOverride":null,"bylines":{"writtenBy":{"id":"dXNlcjo0OA==","databaseId":48,"userId":48,"avatar":"$2a","description":"Nick Wallace studied Economics at the University of Washington. He enjoys getting people thinking about finances by looking a the numbers. Nick is a freelance journalist and data analyst living in Michigan. He still lends his economic and analytic expertise for SmartAsset's studies.","additionalMeta":"$2b","email":null,"firstName":"Nick","fullName":"Nick Wallace","lastName":"Wallace","name":"Nick Wallace","postCount":"$2c","slug":"nick-wallace","__typename":"User"},"editedBy":null,"reviewedBy":null,"factCheckedBy":null,"secondEditor":null},"category":{"id":"dGVybTo4Nw==","children":"$2f","databaseId":87,"categoryId":87,"link":"https://smartasset.com/auto/articles","name":"Auto","postCount":15,"slug":"auto","ancestors":null,"parent":null,"__typename":"Category"},"isModifiedBeforePublished":false,"contentBlocks":["

In 2014, total U.S. sales of plug-in electric vehicles (EVs) hit 118,000. This was a 27% increase over 2013 and the first time in history that electric vehicle sales have reached six figures. While those numbers seem to promise a bright future for electric cars, another development threatens to knock EVs right off the road: plummeting gasoline prices. With the price of a gallon of regular gasoline at a five-year low, consumers thinking about going electric face a difficult financial choice. EVs may be cool, quiet and clean, but if they can’t compete with traditional vehicles on cost, it will be difficult to claim a significant share of the automobile market.

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Thinking about retirement? Try our free 401(k) calculator.

","

To determine where (and if) electric vehicles make financial sense, SmartAsset compared total costs of ownership for three of the most popular EVs—the Tesla Model S, the Ford Focus EV and the Nissan Leaf—to ownership costs of their gasoline-powered equivalents. In our analysis, we considered retail price for a new vehicle (although buying used may be the smarter choice), fuel and energy prices, state and local taxes, state and federal subsidies and average miles driven. (Read more about our methodology below.)

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Key Findings

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29%. That’s the share of the 150 cities in our study in which total cost for electric vehicles is lower than that for gasoline-powered vehicles.
Subsidies are a big deal. Without national and state subsidies for electric vehicle purchases, EVs would lose out to traditional vehicles on cost in every city in the country. The federal tax credit of $7,500 is especially important, but it only applies to people with a large enough tax bill to claim the credit. That means the savings we found may be harder to attain for people with low incomes.
Georgia, California, Colorado. These three states accounted for 10 of the top 15 cities for electric vehicles. Why? Again: it’s all about the subsidies. These states offer strong incentives for electric vehicle purchasers, such as the $5,000 tax credit offered in Georgia.

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$\"Top$

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1. Atlanta, Georgia

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Thanks to the state of Georgia’s generous subsidy program for electric vehicles, which features a tax credit worth 20% of the price of any zero-emission EV (up to $5,000), residents of Atlanta could save an average of $5,273 by buying electric. This makes the ATL the best U.S. city to save money by going electric (in addition to being in the best county in Georgia to save money with a refinance). [Editor’s Note: Since this analysis was done, the Georgia governor has eliminated the subsidy for electric vehicles. It will no longer be available after June 30th.]

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2. Augusta, Georgia

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As in Atlanta, drivers in Augusta who are interested in buying an electric car will benefit greatly from Georgia’s strong incentives for EV purchasers. The main difference between Augusta and Atlanta, when it comes to EVs, is that drivers in Atlanta spend more time (and drive more miles) in their cars. According to the Federal Highway Administration, residents of Augusta drove 10,744 miles per capita in 2012, while Atlantans drove 13,530. That means extra savings for EVs in Atlanta, since electric vehicles generally cost less to operate on a per mile basis.

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3. Seattle, Washington

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Electric car owners in the Puget Sound region benefit from the state of Washington’s cheap, mostly hydroelectric energy, which, at an average of 8.83 cents per kilowatt-hour, is the cheapest in the nation (not to mention the cleanest). Sweetening the deal is the sales tax exemption on EVs for Washington state residents. With a tax rate of 9.5% in the city of Seattle, that adds up to between $2,700 and $6,500 in savings for the three electric cars in our analysis.

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4. Los Angeles, California

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Teslas are becoming increasingly popular in Los Angeles and with good reason. Our analysis found that for the average LA driver, the total cost of a Tesla is about $5,124 less than a comparable BMW. For drivers in a position to take advantage of one of the three “super-charging” stations in the LA area, the difference may be even greater. At these stations, Tesla owners get to charge their vehicles for free, and in a fraction of the time it takes to charge at home. EV drivers also benefit from the State of California’s $2,500 rebate for battery-powered electric vehicle purchases.

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5. San Diego, California

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Among the benefits that California electric car owners receive is eligibility to drive in carpool lanes without any passengers. This is especially helpful in San Diego, which is often rated among the most congested cities in the U.S. Of course, EV owners in the fast lanes should be prepared to suffer the scorn of other drivers who remain stuck in traffic and burning gas.

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6. Naples, Florida

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Unlike drivers in many of the other cities on this list, electric car owners in Naples (which is also one of SmartAsset’s best places for retirement) do not benefit from any state EV incentive programs. What’s driving their high ranking is mileage—Naples drivers put in over 20,000 miles a year, among the highest of any city in our study. Since electric cars cost less to run than traditional automobiles, more miles mean more savings.

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7. Charleston, West Virginia

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West Virginia is coal-country, with coal-fired electric power plants contributing 95% of the state’s energy as of 2013. So, while owning an electric car in Charleston won’t necessarily be any cleaner than a gas car, it will be cheaper. The state average electricity rate is among the lowest in the country, at 9.7 cents per kilowatt-hour.

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8. Denver, Colorado

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According to our analysis, the average EV owner in Denver will save $2,971 over the life of his or her car ownership. The source of those savings? Colorado’s EV tax-credit, which ranged from $5,000 to $6,000 for the three vehicles we considered. Just remember: you can only claim that credit if you have state taxes of that amount or greater. Given that Colorado’s state tax rate is 4.63% of taxable income, that means you’ll need to be earning six-figures to get the full EV tax-credit.

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9. Chicago, Illinois

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While EV owners in Chicago may save money, they may have to sacrifice some convenience to do so—especially in the winter. According to a recent study by AAA, electric vehicle range (i.e. the distance an EV can drive without needing to recharge) falls significantly in cold weather. At 20 degrees Fahrenheit, the average range of the EVs in that study (which included a Ford and a Nissan but not a Tesla) fell by 57%, from 105 miles to 43 miles.

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10. Fort Collins, Colorado

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According to the Federal Highway Administration, the per capita mileage of the Fort Collins area is just 9,006 miles, lower than any other metro area on the list. While that low level of driving means less savings for EV owners, it also means lower costs of vehicle ownership overall, a good tradeoff.

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The Worst Cities for EVs

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While electric cars still can’t beat gas-powered cars for affordability in most U.S. cities, they fall especially short in certain parts of the country. These are the ten worst (most expensive) cities for electric vehicles, with the average added cost of going electric in parenthesis: Honolulu, Hawaii ($4,005); Topeka, Kansas ($3,065); Greenville, South Carolina ($2,994); Lubbock, Texas ($2,988); Sioux Falls, South Dakota ($2,869); Santa Fe, New Mexico ($2,820); Madison, Wisconsin ($2,820); Lansing, Michigan ($2,765); Grand Rapids, Michigan ($2,761); Kalamazoo, Michigan ($2,737).

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Data & Methodology

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To determine where electric vehicles make the most financial sense, SmartAsset calculated total costs of ownership for three electric vehicles and three gasoline-powered comparables. Specifically, we compared the Ford Focus EV with the Ford Focus, the Nissan Leaf with the Nissan Sentra and the Tesla Model S with the BMW 535i xDrive. For the Nissan and the Tesla, we chose the comparable based on vehicle specs including horsepower, size and interior features.

","

For each of those six cars, we calculated the total costs of ownership as follows (we assumed car-buyers could claim the full amount of any tax credits).

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EV Purchase Cost = MSRP + (MSRP x state and local tax rate) – ($7,500 federal subsidy) – (applicable state subsidies)

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Traditional Vehicle Purchase Costs = MSRP + (MSRP x state and local tax rate)

","

EV Annual Energy Cost = (metro area average miles per driver) x (state average energy rate, in dollars per kWh) x (vehicle energy efficiency, in kWh per mile)

","

Traditional Vehicle Annual Fuel Cost = (metro area average miles per driver) x (vehicle fuel efficiency, in gallons per mile) x (average local gas prices over past year, in dollars per gallon)

","

With those formulas, we calculated the purchase cost and the value of annual costs over six years. Six years is the average length of vehicle ownership in the U.S., according to the industry research group IHS. We combined those two costs to produce the total cost of ownership for each vehicle.

","

We then calculated the cost-differential between each electric vehicle and its gas-powered equivalent, in each of the 150 cities in our study. So for example, we found that, in San Francisco the expected cost of ownership for a Ford Focus EV is $24,957, while the cost of owning a gas-powered Ford Focus is $26,329. That adds up to a cost-differential of $1,372.

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As a final step, we averaged the three separate cost-differential numbers for each city. The top cities in our study are the cities that had the highest average savings for the three electric vehicles.

","

The data used in our study comes from the U.S. Census Bureau, GasBuddy.com, the Federal Highway Administration, the U.S. Energy Information Administration and fueleconomy.gov.

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Question about our study? Contact us at blog [at] smartasset.com.

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Photo credit: Ford Motors

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\n","featuredImage":{"id":"cG9zdDoxNzI3NzU=","databaseId":172775,"altText":"Best Time to Buy a Car","date":"2022-11-08T17:45:20","fileSize":39406,"mimeType":"image/jpeg","modified":"2022-11-08T17:45:20","sourceUrl":"https://smartasset.com/wp-content/uploads/sites/2/2016/12/best-car-1.jpg","__typename":"MediaItem"},"modified":{"datetime":"2024-3-14","readable":"March 14, 2024"},"multipleBylinesByRole":{"editedBy":null,"reviewedBy":null,"writtenBy":null,"factCheckedBy":{"id":"dXNlcjoxMzY=","databaseId":136,"userId":136,"avatar":{"url":"https://secure.gravatar.com/avatar/1d295f71ad5f26fc505155b8d7e5e2a0?s=96&d=mm&r=g","size":96,"__typename":"Avatar"},"description":"Jeff is a Writer/Editor for SmartAsset. He's an expert in a variety of personal finance topics, such as investing, banking and retirement. Jeff has received his JD and MBA and has been featured in a number of publications, such as Investopedia, The Street, Forbes, Yahoo! Finance and more. He currently resides in Utah with his wife and five children, where they cheer for the Denver Broncos and make it to the water to sail whenever given the chance. Jeff currently holds the Certified Educator in Personal Finance (CEPF®) designation.","additionalMeta":{"expertise":"Financial Planning, Small Business, Retirement, Banking","__typename":"User_Additionalmeta"},"email":null,"firstName":"Jeff","fullName":"Jeff White, CEPF®","lastName":"White, CEPF®","name":"Jeff White, CEPF®","postCount":{"pageInfo":{"offsetPagination":{"total":16,"__typename":"OffsetPaginationPageInfo"},"__typename":"UserToPostConnectionPageInfo"},"__typename":"UserToPostConnection"},"slug":"jwhite","__typename":"User"},"secondEditor":null,"hideAuthor":null,"__typename":"Post_Multiplebylinesbyrole"},"adTargetingOverrides":{"fieldGroupName":"adTargetingOverrides","pageGroupNewKey":null,"__typename":"Post_Adtargetingoverrides"},"seo":{"canonical":"https://smartasset.com/auto/the-best-time-of-year-to-buy-a-car","metaDesc":"The best time to buy a car depends on whether you want a new car or a used car. Also, there are certain parts of the year when sales typically occur.","metaKeywords":"","metaRobotsNofollow":"follow","metaRobotsNoindex":"index","readingTime":5,"title":"When Should You Buy a Car?","__typename":"PostTypeSEO"},"slug":"the-best-time-of-year-to-buy-a-car","status":"publish","title":"When Should You Buy a Car?","uri":"/auto/the-best-time-of-year-to-buy-a-car","tags":{"nodes":[],"__typename":"PostToTagConnection"},"__typename":"Post","adPageGroupOverride":null,"bylines":{"writtenBy":{"id":"dXNlcjo1Mw==","databaseId":53,"userId":53,"avatar":"$32","description":"Amanda Dixon is a personal finance writer and editor with an expertise in taxes and banking. She studied journalism and sociology at the University of Georgia. Her work has been featured in Business Insider, AOL, Bankrate, The Huffington Post, Fox Business News, Mashable and CBS News. Born and raised in metro Atlanta, Amanda currently lives in Brooklyn.","additionalMeta":"$33","email":null,"firstName":"Amanda","fullName":"Amanda Dixon","lastName":"Dixon","name":"Amanda Dixon","postCount":"$34","slug":"amanda-dixon","__typename":"User"},"editedBy":null,"reviewedBy":null,"factCheckedBy":{"id":"dXNlcjoxMzY=","databaseId":136,"userId":136,"avatar":"$37","description":"Jeff is a Writer/Editor for SmartAsset. He's an expert in a variety of personal finance topics, such as investing, banking and retirement. Jeff has received his JD and MBA and has been featured in a number of publications, such as Investopedia, The Street, Forbes, Yahoo! Finance and more. He currently resides in Utah with his wife and five children, where they cheer for the Denver Broncos and make it to the water to sail whenever given the chance. Jeff currently holds the Certified Educator in Personal Finance (CEPF®) designation.","additionalMeta":"$38","email":null,"firstName":"Jeff","fullName":"Jeff White, CEPF®","lastName":"White, CEPF®","name":"Jeff White, CEPF®","postCount":"$39","slug":"jeff-white-cepf","__typename":"User"},"secondEditor":null},"category":{"id":"dGVybTo4Nw==","children":"$3c","databaseId":87,"categoryId":87,"link":"https://smartasset.com/auto/articles","name":"Auto","postCount":15,"slug":"auto","ancestors":null,"parent":null,"__typename":"Category"},"isModifiedBeforePublished":false,"contentBlocks":["

Timing is everything and when it comes to buying a car, that saying couldn’t be more true. Negotiating and haggling with car salesmen can reduce the price of what you have to pay for a new whip. But if you want to get the best deal on a car, you’ll need to know when to show up at the dealership. Whether you’re buying a used vehicle or a brand-new ride, we’ll tell you the best time of year to buy a car. Being that the purchase of a car is rather pricey, consider meeting with a financial advisor in your area to discuss your finances beforehand.

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When to Buy a New Car

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If you’re on a budget, one of the best times to buy a new car is the end of the model season. New car models are often introduced each year between late summer and early fall. While you might miss out on some new features, buying a new car in August or early September may save you some money.

","

Waiting until the end of the year to buy a new car can work in your favor as well. Many car dealers offer year-end sales in an effort to get rid of older vehicles and make room for new inventory. Buying a new car on a holiday like Christmas Eve or New Year’s Eve is another way to get a deep discount.

","

If you can’t wait until December to get a new car, you might want to buy a car at the end of the month or the end of a quarter. If a salesperson hasn’t sold very many vehicles in weeks, he or she might be willing to compromise and lower the price of the car you want to buy. Even if a salesman has managed to sell multiple cars throughout the month, he might want to close one last deal to meet a sales goal or score a bonus.

","

Shopping for a car at the end of the day may or may not be effective. If you stop by a dealership an hour before it’s set to close, a salesperson may be open to negotiating so that he or she can end the day on a high note. But if he or she is used to working long hours, your sales associate may not be that flexible.

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When to Buy a Used Car

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A recent study from iseecars.com ranked the best times to buy a used car. At the top of their list are holidays including Black Friday, Veterans Day, Thanksgiving and Columbus Day. The months of November and December are also considered good times to purchase a used car.

","

According to the study, the months of April, May and June are some of the worst times to buy a used car. Specifically, Easter, Mother’s Day and Father’s Day are bad days for used-car buyers. But the No. 1 worst day to purchase a used car is the Fourth of July.

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When Not to Buy a New Car

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Generally, one of the worst times to buy a new car is in the spring. During this time of year, you’ll see more people on car lots looking to soak up some sun and cash in their tax refunds. Other bad times to shop for new cars are whenever a particular vehicle is popular among consumers and whenever a new car model has been released.

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Some people seem to think that buying a car on a rainy day is a good idea. But that approach usually doesn’t work. In fact, you can expect car dealerships to be filled with people when there’s bad weather simply because people tend to believe that they’ll find great deals on rainy days.

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Bottom Line

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The best time of year to buy a car ultimately depends on your personal preferences and how much you’re willing to spend on a vehicle. If you’re rolling in dough and you want your car to have top-of-the-line features and amenities, you might want to buy a car as soon as a new model comes out. But if you’re trying to shave hundreds of dollars off your purchase price, experts say that it’s best to head to the dealership at the end of a period in the fall or winter, like the end of the month, quarter or year.

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Our advice? When it comes to buying cars and getting your way at the dealership, it helps to know what you’re looking for. Doing plenty of research and knowing the make and model that you want your car to have can make it easier to figure out when to purchase your new vehicle.

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Tips for Taking Care of Your Finances

","$3e","

Photo credit: ©iStock.com/cosmin4000, ©iStock.com/ViewApart, ©iStock.com/kali9

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Unless you’re an eccentric living in the hills of Northeast Pennsylvania (I’m not mentioning names, it’s me) you will eventually want to get rid of your old car and move on to something newer if not brand new. There is the third option, which makes my wife crazy, and that is to keep it until it dies peacefully in it’s sleep. To be honest my wife gets a new car every few years, I don’t.

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Find out now: How much mortgage can I afford?

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The rest of you most likely like to have a fresh vehicle every so often and when the time comes you probably have a quiet inner debate about what to do with your old car. Let’s say it’s a 2009 Honda Accord sedan in excellent condition. If you bring it in to the dealer you’ll get about $9,414 for the trade-in according to Kelly Blue Book of course if you choose to sell it on your own you can expect to get about $11,000.

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That’s a $1,600 difference or a Caribbean cruise for two in a nice cabin with a balcony. If that was all there was to the story there would be no such thing as trade-ins but trade-ins exist as an option for a reason. People like them; they’re hassle free, mostly. You don’t have to deal with all sorts of slimy strangers (a car salesman joke is just too easy) calling you at all hours of the night and there’s the haggling over price.

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The Cost of a Profit

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Selling your used car on your own is a guarantee you will get more money than any dealer will give you. Selling your car on your own comes has a cost and comes at a price. First the cost, a private sale means you have to let people know you are selling a car and that means advertising. Newspapers, fliers, the internet and signs on the car itself all work and with the exception of the last one cost money.

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Getting top dollar for your car means making the tired old beast beautiful again which means detailing. If you’ve ever been to a used car lot you’ll notice that used car look almost as good as the new ones. That’s because as the old saying goes “eye appeal is buy appeal”. Your car may be used to you but it’s new to the person your trying to sell it to so it better look that way.

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The cost side of the equation is your time an trouble in arranging the ads, getting the car ready to show prospective buyers and the thrill of making new friends and influencing strangers. All told you could be looking at 8 to 16 hours of your time to complete the sale. Splitting the difference at that’s 12 hours of your life you’re giving up. For the average person earning $45,000 a year your time to sell the car is worth $260.

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Reality Rears it’s Ugly Head

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I mentioned Kelly Blue Book as a place to determine the trade-in or retail value of your car but there are other sites such as Edmunds.com and Autotrader.com. On the three sites there was a spread almost $2,000 on the trade-in value of the car. Which is part one of the reality story. Not all valuation sites and services are the same.

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Second and more importantly the only person who can give you a definitive price that they will pay for your trade-in is the dealer. Many dealers will always quote prices that are lower than the trade-in value you found online and trade-in offers will vary from dealer to dealer even for the same manufacturer.

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If trading is the option you are choosing be as careful about shopping trade-in values as you are about shopping prices for your new car. The trade-in price a dealer offers is just that an offer and is negotiable and should be negotiated just like you would negotiate the price of the car you plan to purchase.

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Dollars and Sense

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Even after you deduct your time and expense from the sale price of your 2009 Accord you are still walking away with better than $1,100 and that’s enough to send your wife on a cruise so you can stay home and work on the car you refuse to get rid of before it stops running.

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These days, it can take a long time to pay off a car loan. On average, loans for new and used vehicles come with terms lasting more than five years. Paying down a car loan isn’t that different from paying down a mortgage. In both cases, a large percentage of your initial payments go toward paying interest. If you are not familiar with why that is, we explain a concept called amortization.

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Consider working with a financial advisor as you make decisions about taking out a loan and evaluating which loans should be paid down first.

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Car Loan Amortization: The Basics

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Amortization is the process of repaying a loan on a set schedule. In order to do that, you’re required to make a payment every month by a certain due date. With each payment, your money is split between paying off interest and paying off your principal balance (or the amount that your lender agreed to lend you).

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What you’ll soon discover is that your car payments – at least in the beginning – cover quite a bit of interest. That’s how amortization works. Over time, your lender will use a greater share of your car payments to reduce your principal loan balance (and a smaller percentage to pay for interest) until you’ve completely paid off the vehicle you purchased.

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Not all loans amortize. For example, applying for a credit card is akin to applying for a loan. While your credit card statement will include a minimum payment amount, there’s no date set in advance for when that credit card debt has to be paid off.

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With amortizing loans – like car loans and home loans – you’re expected to make payments on a regular basis according to something called an amortization schedule. Your lender determines in advance when your loan must be paid off, whether that’s in five years or 30 years.

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Find out now: How much house can I afford?

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The Interest on Your Car Loan

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Now let’s talk about interest. You’re not going to be able to borrow money to finance a car purchase without paying a fee (interest). But there’s a key difference between simple interest and compound interest. When it comes to taking out a loan, simple interest is the amount of money that’s charged on top of your principal. Compound interest, however, accounts for the fee that accrues on top of your principal balance and on any unpaid interest.

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As of April 2016, 60-month new car loans have rates that are just above 3%, on average. Rates for used cars with 36-month terms are closer to 4%.

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The majority of car loans have simple interest rates. As a borrower, that’s good news. If your interest doesn’t compound, you won’t have to turn as much money over to your lender. And the sooner you pay off your car loan, the less interest you’ll pay overall. You can also speed up the process of eliminating your debt by making extra car payments (if that’s affordable) and refinancing to a shorter loan term.

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Car Loan Amortization Schedules

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An amortization schedule is a table that specifies just how much of each loan payment will cover the interest owed and how much will cover the principal balance. If you agreed to pay back the money you borrowed to buy a car in five years, your auto loan amortization schedule will include all 60 payments that you’ll need to make. Beside each payment, you’ll likely see the total amount of paid interest and what’s left of your car loan’s principal balance.

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While the ratio of what’s applied towards interest versus the principal will change as your final payment deadline draws nearer, your car payments will probably stay the same from month to month. To view your amortization schedule, you can use an online calculator that’ll do the math for you. But if you’re feeling ambitious, you can easily make an auto loan amortization schedule by creating an Excel spreadsheet.

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To determine the percentage of your initial car payment that’ll pay for your interest, just multiply the principal balance by the periodic interest rate, which is your annual interest rate divided by 12). Then you’ll calculate what’s going toward the principal by subtracting the interest amount from the total payment amount.

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For example, if you have a $25,000 five-year car loan with an annual interest rate of 3%, your first payment might be $449. Out of that payment, you’ll pay $62.50 in interest and reduce your principal balance by $386.50 ($449 – $62.50). Now you only have a remaining balance of $24,613.50 to pay off, and you can continue your calculations until you get to the point where you don’t owe your lender anything.

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Related Article: The Best Cities for Electric Cars

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Final Word

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Auto loan amortization isn’t nearly as complicated as it might sound. It requires car owners to make regular payments until their loans are paid off. Since lenders aren’t required to hand out auto amortization schedules, it might be a good idea to ask for one or use a calculator before taking out a loan. That way, you’ll know how your lender will break down your payments.

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Tips on Borrowing

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