Interest Calculation Formula:
From: | To: |
This calculator compares the monthly interest you would pay when financing a car purchase using a credit card versus a traditional auto loan. It helps you understand the cost difference between these two financing options.
The calculator uses the simple interest formula:
Where:
Explanation: The calculator converts annual rates to monthly rates by dividing by 12, then multiplies by your principal balance to show what you'd pay in interest each month for each option.
Details: Credit cards typically have much higher APRs (15-25%) than auto loans (3-10%). This comparison shows how much more expensive it can be to put a car purchase on a credit card versus using traditional financing.
Tips: Enter your car purchase price as the principal, your credit card's APR, and the auto loan rate you qualify for. The calculator will show the monthly interest for each option.
Q1: Why would anyone use a credit card for a car purchase?
A: Some dealers accept credit cards for down payments or full purchases, especially if you have a high limit. Some people do it for rewards points, but the interest usually outweighs any benefits.
Q2: Are there other costs not shown here?
A: Yes, auto loans often have fees and may require full coverage insurance. Credit cards may have cash advance fees if used directly at dealerships.
Q3: What about 0% APR credit card offers?
A: If you qualify for 0% APR and can pay off during the promo period, this could be beneficial. The calculator assumes standard interest rates.
Q4: How accurate is this comparison?
A: It shows monthly interest only. Auto loans are typically amortized with decreasing interest over time, while credit cards compound if not paid in full.
Q5: Should I ever put a car purchase on a credit card?
A: Generally only for small amounts you can pay off immediately, or if you have a 0% offer and solid repayment plan. The interest costs are usually prohibitive.