Auto financing with Morrie’s

When you’re looking for an auto loan, it pays to shop around. Morrie’s helps you compare auto loan rates and loan terms from multiple lenders. Compare different types of automobile loans, including new car loans, used car loans, and auto refinancing options.




Let’s say you take out a car loan for $12,000 to be paid back over five years (or 60 months) at an interest rate of 10%. Your monthly payments for this loan would be $254.96. You can calculate the payment yourself using the following equation:

Car Monthly Payment Equation for car loan interest:

Or, you can just use our car loan calculator. For sake of simplicity in this example, make the tax rate 0%.

Since your interest charge every month is based on how much you still owe on your loan, you can reduce your interest charges by making unscheduled payments that bring down your loan balance. When you make unscheduled payments, you are engaging in an accelerated car loan payoff which will reduce the total amount of interest charges you pay over the course of your loan and may help you pay back your loan faster than originally planned.

Paying a debt like a car loan early is generally a good thing, because you end up paying less interest charges. However, you should always consider your entire financial situation before choosing to make unscheduled payments. Obviously, you need to have the extra cash to make such a payment, but even if you do, you have to ask yourself if you have better uses for that extra money. For example, if you owe money on a credit card, then you are probably better off paying down that credit card’s balance before making an unscheduled car loan payment. Ultimately, you should consider carefully if an accelerated payoff makes sense for you.

If you cannot afford to pay extra each month for you car loan, but would still like to pay less for your car in the long run and/or reduce your monthly payments, you may want to consider refinancing your car. If you refinance to a lower interest rate, you may pay significantly less for your car loan.

Try our auto loan refinancing calculator to see how refinancing may be able to help you.

While taxes are generally a complicated issue and need to be worked out on an individual basis, the concept of how taxes affect your car loan is straightforward. When buying a car, you are charged taxes on the price of the car you are purchasing, meaning the amount of tax you owe is added directly to your loan amount. So, if you wish to buy a car for $20,000 and you owe taxes on it of 8%, then you will owe $1,600 [$1,600 = $20,000 * 8%] in taxes and thus will need a car loan for $21,600.

Notice that your tax rate will not change the interest rate you will owe on your loan. However, the amount of tax you must borrower to pay for your taxes will be included in the amount you borrow from the lender, and you have to pay interest on the full amount you borrow. Your taxes do not increase your interest rate, but they do increase the loan balance on which your interest charges are based.

Unfortunately, taxes are a part of life and are unavoidable. Still, it is important that you understand how your tax rate will influence your auto loan.

While shopping for car loans, credit cards, and other financial services, you have probably come across the term APR. APR stands for “Annual Percentage Rate.” It is the annual rate of finance charge you pay for your loan or credit line. For car loans, APR is the rate you pay that accounts for your interest charges plus all other fees you have to pay to get your loan.

To clarify how much you will pay in interest charges versus how much you will pay in interest charges plus fees, your car loan paperwork will likely come with two rates. Each gives you different information about your loan, yet mathematically they are the same in that they both give you the same payment (the one quoted on your loan paperwork) and both require you to pay the same amount for you car over the course of you loan.

The lower of the two rates is your interest rate or note rate. This rate describes how much in interest charges you will pay on the balance of your loan over a year period.

The higher rate will be your APR. The APR accounts for the total finance charge you pay on your loan in a given year. The finance charge is made up of both your interest charges and your prepaid finance charges, which are various charges rolled into your loan amount that can include different loan fees and the interest that accumulates to the day of your first loan payment. Even though your prepaid finance charges are included in your loan principal and so are indeed “prepaid,” you still pay for those fees with your car payments over the course of your loan, making the prepaid charges more like interest charges. Remember, just because your APR is higher than the interest rate quoted to you does not indicate that your lender has changed the loan terms it is offering you.

You can think of your two rates as follows.

Note rate or interest rate equation

(Note, the “loan amount” is the balance on your loan principal, which is the amount you borrow. The “interest charges” are those paid in a 12 month period.)

APR Equation

(Note, the “loan amount” is the balance of your amount financed or the amount you need to buy or refinance your car. The “interest charges + prepaid charges” are those paid in 12 month period.)

Please note, while these equations are helpful for understanding these two rates, they do not necessarily reflect how you would calculate the two rates. However, you can read much more about how APR works here, including how to use the above equations to correctly estimate your note rate or APR.

Car Financing Guide

Whether this is your first time buying a car or you’ve been buying and selling cars for years, this guide will help you learn everything you need to know to get the best possible car loan for your next vehicle purchase.

When looking for a car loan, whether new or used, Morrie’s can help save you money by comparison shopping different lenders. We’ll find a lender that meets your needs and make sure you get the best rate possible on your next car loan!

Should You Buy a New or Used Car?

Buying a new car has advantages and disadvantages, as does buying a used car. Even though you may want that brand new, never-been-driven, perfectly clean car, it has to make sense for your situation and fit within your budget. Cars depreciate the second you drive them off the lot. Perhaps buying a used car (or one that is CPO-certified) allows you to save more money each month or have extra spending money.

Complete Guide to Getting a Car Loan

To see specific differences on new and used cars, including types of financing and qualifying for a car loan, see our Complete Guide to New and Used Cars.

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12520 Wayzata Blvd • Minnetonka, MN 55305

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Morrie's Auto Group 44.971932, -93.438603.