1. What is Interest Rate Difference?

The interest rate difference between two car loan options shows how much more or less you would pay in interest. Even small differences can significantly impact total loan costs over time.

2. How Does the Calculator Work?

The calculator uses the simple formula:

Where:

• \( Car\ Rate1 \) — First car loan interest rate (%)
• \( Car\ Rate2 \) — Second car loan interest rate (%)

Explanation: The calculation shows the absolute difference between two interest rates, helping you compare loan options.

3. Importance of Comparing Interest Rates

Details: Comparing interest rates helps identify the most cost-effective loan option. A lower rate can save thousands over the loan term.

4. Using the Calculator

Tips: Enter both interest rates as percentages (e.g., 5.25 for 5.25%). The calculator will show the difference between them.

5. Frequently Asked Questions (FAQ)

Q1: How significant is a 1% difference in car loan rates?
A: On a $30,000 5-year loan, 1% difference equals about $800 in total interest savings.

Q2: Should I only consider interest rates when choosing a car loan?
A: No, also consider loan term, fees, prepayment penalties, and lender reputation.

Q3: What's considered a good car loan rate?
A: Rates vary by credit score, but generally under 5% is excellent for new cars (as of 2023).

Q4: How often do car loan rates change?
A: Rates can change daily based on market conditions and Federal Reserve policies.

Q5: Can I negotiate car loan interest rates?
A: Yes, especially with good credit. Always shop around and compare offers from multiple lenders.