1. What is Dealership Financing?

Dealership financing is a common method of vehicle financing where the total cost is calculated based on the principal amount plus interest over the loan term. This simple interest calculation helps buyers understand their total repayment amount.

2. How Does the Calculator Work?

The calculator uses the dealership financing equation:

Where:

• \( Price \) — Vehicle purchase price in USD
• \( Rate \) — Annual interest rate in decimal form
• \( Term \) — Loan duration in years

Explanation: The equation calculates the total amount to be repaid by adding the interest (Price × Rate × Term) to the original principal amount.

3. Importance of Financing Calculation

Details: Understanding the total financing cost helps buyers compare loan options, budget effectively, and make informed purchasing decisions.

4. Using the Calculator

Tips: Enter vehicle price in USD, interest rate as decimal (e.g., 0.05 for 5%), and loan term in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How is this different from compound interest?
A: Dealership financing typically uses simple interest (interest on principal only), while compound interest calculates interest on both principal and accumulated interest.

Q2: What's a typical interest rate for dealership financing?
A: Rates vary but typically range from 3% (0.03) to 15% (0.15) depending on credit score, loan term, and market conditions.

Q3: Should I convert APR to monthly rate?
A: No, this calculator uses annual rate in decimal form. The term can be in fractions of years (e.g., 2.5 for 2½ years).

Q4: Does this include down payments?
A: No, this calculates total financing amount before any down payment. Subtract down payment from the result to get amount financed.

Q5: Are there fees not included in this calculation?
A: Yes, this doesn't account for origination fees, documentation fees, or other charges that may be part of the financing package.