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Components of a Car Payment

Melanie Tarrant on November 20, 2024

When you get a loan to buy a car, you’ll get a new set of keys — and a new monthly payment. You may be wondering how this payment is determined and calculated. 

So many questions, and we’ve got answers! Let’s break down the parts of a car payment, explain how monthly payments are calculated, and offer tips for managing your expenses well. 

Components of a Car Payment

1. Principal
This is the amount you borrow to purchase your car. For example, if the car costs $35,000 and you make a $5,000 down payment, your loan principal is $30,000. Each monthly payment chips away at this amount, with a portion dedicated to reducing your loan balance. Paying extra toward the principal can help you pay off the loan faster.

2. Interest
Interest is the cost of borrowing money and is calculated as a percentage of your principal. Your interest rate depends on factors like your credit score, loan term, and market conditions. The lower your rate, the less you’ll pay over time.

3. Loan Term
The loan term is how long you’ll take to repay your loan, typically expressed in months (e.g., 36, 60, or 72 months). A longer term means lower monthly payments but higher total interest costs over the life of the loan.

4. Taxes and Fees
If you roll upfront costs like taxes, registration, or fees into your loan, they’ll increase your principal and, consequently, your monthly payment.

5. Add-ons
Optional extras like extended warranties or gap insurance can also be financed, raising your monthly payment.

What’s Not in Your Payment (But Still Important)

Owning a car comes with additional costs that aren’t included in your loan payment but need to be part of your budget:

  • Insurance: Comprehensive and collision coverage are often required by lenders. Shop for the best rates to save money.
  • Maintenance: Budget for regular servicing to keep your car in good condition.
  • Fuel/Electricity: Whether gas-powered or electric, your car needs energy to get you from point A to point B.

How Car Loan Payments Are Calculated

When a lender calculates your monthly payment, they consider:

  • The price of the car, minus any down payment or trade-in value
  • The loan principal (including add-ons and rolled-in costs)
  • The interest rate
  • The loan term (number of months)

They then divide the total loan cost (principal + interest) by the number of months in the loan term to determine your monthly payment.

Tips for Managing Your Car Payment

1. Shop Around for the Best Loan
Get the vehicle you want at a rate you can afford with AGCU. Contact an AGCU lender to secure the best interest rate and terms. Even a slight difference in the rate can save you a lot over the life of the loan.

2. Make a Larger Down Payment
A bigger down payment reduces the amount you need to finance, lowering your monthly payments and the total interest paid.

3. Opt for a Shorter Loan Term
While shorter terms come with higher monthly payments, they also mean less interest over the life of the loan. If your budget allows, choosing a shorter term can save you money in the long run.

4. Set a Budget for Ownership Costs
Remember to account for insurance, maintenance, and fuel when calculating your total car expenses each month.

Final Thoughts

Understanding the anatomy of your car payment can empower you to make smarter decisions about financing and managing your loan. If you’re ready to take control, consider opening an interest-earning savings account to build your down payment or plan for unexpected costs.
Have a question or want to get started with an application? Connect with an AGCU Video Banking Representative or apply online today!

Or you can speak face-to-face with an AGCU Video Banking Representative from anywhere.
Give it a try today! Video Banking Hours (CST): Mon – Fri: 9:00 a.m.- 5:00 p.m.

Disclaimer: Always consult a financial advisor, accountant, or lawyer to discuss your specific situation.

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Saving for Real Estate Taxes and Insurance Without an Escrow Account

Melanie Tarrant on October 15, 2024

Many homeowners rely on escrow accounts to manage real estate tax and homeowners insurance payments. These accounts allow mortgage servicers to collect a portion of your taxes and insurance along with your monthly mortgage payment, ensuring those big bills are handled on time. However, not all members choose this option—either because they’ve paid off their mortgage, or they’ve received an escrow waiver. If you’re in this situation, here’s how to manage these payments on your own and make the most of your money in the process.

What Is an Escrow Account?

An escrow account is typically required by mortgage lenders to ensure real estate taxes and homeowners insurance are paid on time. Each month, part of your mortgage payment goes into this account, and your lender pays those bills on your behalf when they’re due. It’s a convenient way to break large, annual bills into smaller, more manageable amounts.

Benefits and Drawbacks of Escrow Accounts

Benefits:

  • Convenience: With an escrow account, your servicer handles the payments for you. This reduces the number of bills you have to track and ensures you don’t miss a due date.
  • Budgeting Help: Breaking large bills into smaller monthly amounts can make it easier to budget and avoid hefty lump sum payments at the end of the year.

Drawbacks:

  • No Interest: Most escrow accounts don’t pay interest on the funds sitting there waiting to be used. This means you miss out on potential earnings that your money could generate in a savings account.
  • Less Control: Since the lender controls the funds and when payments are made, you have less flexibility with how and when your money is used.

How to Save Without an Escrow Account

If you’ve opted out of escrow, you’ll be responsible for paying your real estate taxes and insurance on your own. Here’s a disciplined approach to make sure you have the money when you need it:

  1. Open a Dedicated Savings Account: Set up a separate, interest-bearing savings account specifically for real estate taxes and insurance. This way, your money is working for you while it sits, waiting to be used. Click here to see our current interest rates on Hight Yield Checking, CDs, and Money Market Accounts.
  2. Calculate Your Annual Payments: Estimate your total yearly payments for real estate taxes and homeowners insurance. You can typically get this information from your local tax authority or insurance provider.
  3. Set Up Automatic Transfers: Divide your total yearly payment by 12, and set up monthly automatic transfers into your dedicated account. This makes saving easier and ensures you’re consistently putting money away.
  4. Monitor Your Balance: Regularly check your savings account with AGCU Mobile and Online Banking to make sure you’re on track. If there are any changes to your tax or insurance rates, adjust your savings plan accordingly.
  5. Maximize Interest: Choose an account with a higher interest rate so your savings can grow. While it might not generate huge returns, every little bit helps when preparing for large expenses. Click here to see rates!
  6. Lower Your Insurance Payment: If you haven’t compared rates in a while, contact AGCU Insurance to see if you can lower your homeowner’s insurance costs.

Discipline Is Key

One of the main challenges of managing these payments without an escrow account is the discipline required to save consistently. If you’re not careful, it can be easy to fall behind on saving and face a large, unexpected bill at the end of the year. A separate savings account with automatic transfers can help avoid this issue.

If you don’t have an escrow account, we highly recommend opening an interest-bearing savings account today. Not only will this help you prepare for your annual real estate tax and insurance bills, but it also allows you to earn interest in the meantime. Talk to one of our Member Services Representatives today about setting up an account that works for you.

Disclaimer: This article is for informational purposes only. Please consult a lawyer or accountant for professional advice on managing real estate taxes and insurance.

5 Best Times to Buy a Car: Your Guide to Scoring the Best Deals

Melanie Tarrant on September 3, 2024

5 best times to buy a car

A little planning goes a long way. Here’s when to shop, when to wait, and how to walk into the dealership with confidence.

Buying a car is one of the biggest financial decisions you’ll make, and the price you pay has a lot to do with when you show up. Dealers operate on sales cycles, quotas, and inventory pressures that create real windows of opportunity for smart buyers.

Before heading to the lot, be sure to check AGCU’s auto loan rates and apply for pre-approval online. Walking in pre-approved gives you real negotiating power.

1. The Best Days to Buy: Skip the Weekend Rush

If you’ve ever visited a dealership on a Saturday, you know the feeling: packed showrooms, distracted salespeople, and very little motivation for anyone to cut you a deal.

Instead, try heading in on a Tuesday or Wednesday. Foot traffic is lighter, salespeople have more time to focus on you, and the quieter atmosphere creates more room for negotiation.

Quick tips for your visit:
  • Aim for midweek whenever your schedule allows
  • Call ahead to confirm inventory
  • Take your time and avoid pressure decisions

2. The Best Time of Day: Afternoon Has Its Advantages

Late afternoon (4–6 PM) tends to be a sweet spot for buyers. Salespeople who haven’t closed a deal yet may be more motivated before closing time.

A motivated salesperson and a patient buyer can be a great combination—just be ready to walk away if the deal doesn’t feel right.

3. The Best Months to Buy: September, October & December

Timing your purchase to the right month can significantly affect the price you pay.

September and October are great for current-year models as new inventory arrives. December is often the best month because dealers are racing to meet annual sales goals.

The final week of the year—especially December 26–31—often produces the deepest discounts.

4. The Best Time of the Month: The Last Few Days

Dealership sales quotas reset each month. As the final days approach, the urgency to hit targets increases.

Shopping during the last three to five days of the month can give you additional negotiating power.

5. Best Time to Buy Used: January and February

The new year often brings a surge of trade-ins after holiday purchases.

Dealerships typically have more used inventory than they want to hold, which means stronger motivation to sell at competitive prices.

Worst Times to Buy a Car

  • Weekends: Higher buyer traffic means less negotiation leverage.
  • Early in the Year: Discounts tend to be smaller than later months.
  • Summer: Generally fewer incentives unless tied to a holiday event.

Frequently Asked Questions

What is the best month to buy a car?
December often provides the deepest discounts, followed by September and October.

Is it better to buy at the end of the month?
Yes. Dealers are more motivated to hit sales quotas.

What day of the week is best?
Tuesday and Wednesday typically provide a calmer environment for negotiation.

Should I get pre-approved?
Absolutely. Pre-approval strengthens your negotiating position.

Make Your Move With AGCU

AGCU offers competitive rates on new and used vehicle loans—including 100% financing options.

Your next steps:

The right car at the right price is out there—and with the right timing, you’ll be ready to find it.

20 Back-to-School Hacks So You Can Beat Inflation

Melanie Tarrant on August 2, 2024

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20 Back-to-School Hacks to Beat Inflation

Smart Ways to Stretch Your Back-to-School Budget

Back-to-school shopping has become more expensive in recent years, but that doesn’t mean you have to overspend. With a little planning and a few smart shopping strategies, you can save money while making sure your students have everything they need for a successful school year.

Here are 20 practical ways to beat inflation and keep more money in your pocket.

20 Back-to-School Hacks to Beat Inflation

20 Money-Saving Hacks

1. Shop Your House First

Before buying anything new, check closets, drawers, and last year’s backpacks for reusable supplies.

2. Wait for the Official Supply List

Buying too early can lead to unnecessary purchases that your child’s teacher may not require.

3. Set a Budget

Decide how much you’re willing to spend before you start shopping.

4. Compare Prices

Check multiple stores and compare online prices before making larger purchases.

5. Buy Store Brands

Generic notebooks, folders, and pencils often perform just as well as name brands.

6. Buy in Bulk

Split larger packages with another family to save money on commonly used supplies.

7. Shop Tax-Free Weekends

If your state offers a tax holiday, plan your shopping around those dates.

8. Reuse Backpacks & Lunch Boxes

A quick cleaning may save you from buying new ones every year.

9. Skip Trendy Extras

Character notebooks and designer supplies may be fun—but they also cost more.

10. Shop Clearance Sections

Many stores continue discounting school supplies after the season begins.

11. Buy Clothes in Stages

Students don’t need an entire wardrobe on the first day of school.

12. Watch for Student Discounts

Many retailers offer discounts on laptops, software, and technology for students.

13. Pack Lunch More Often

Bringing lunch even a few days each week can add up to significant savings over the school year.

14. Label Everything

Prevent expensive replacements by labeling backpacks, lunch boxes, and supplies.

15. Budget for Hidden Costs

Remember activity fees, sports, field trips, fundraisers, and classroom donations.

16. Avoid Impulse Purchases

Those small checkout items can quickly push you over budget.

17. Shop With Cash or a Spending Limit

Having a limit makes it easier to avoid overspending.

18. Track Spending in Digital Banking

Use AGCU Online Banking or Mobile Banking to monitor purchases and stay on budget.

19. Start Saving for Next Year Today

Setting aside a small amount each month makes next year’s shopping much less stressful.

20. Focus on What Really Matters

Kids remember great teachers, friends, and experiences—not whether every notebook was brand new.

💡 Money-Saving Tip

Saving just $5 on ten different purchases adds up to $50—and those small savings can make a big difference during back-to-school season.

Back-to-School Shopping Checklist

  • ☐ Inventory last year’s supplies
  • ☐ Create a shopping list
  • ☐ Compare prices
  • ☐ Use coupons and sales
  • ☐ Set a spending limit
  • ☐ Track purchases
  • ☐ Save receipts
  • ☐ Budget for hidden school expenses

Final Thought

Inflation may make back-to-school shopping more expensive, but smart planning can help you keep costs under control.

By shopping strategically, avoiding impulse purchases, and using AGCU’s digital banking tools to track your spending, you can start the school year prepared—and keep your budget on track.

Your Ultimate Pre-Vacation Checklist: Financial and Practical Tips

Melanie Tarrant on July 30, 2024

Your bags are packed, your itinerary is set, and you’re counting down the minutes until you take off for your dream summer getaway. Before you head out to the airport, though, read through this checklist of important things to remember, especially when it comes to your finances.

1. Notify Your Credit Union About Your Vacation Plans

Give us a call at 866-508-2428 before you set off on your vacay. Let us know your vacation destination so we can honor any card transactions you make while in another state. If you’re traveling overseas, ask us about foreign transaction fees and best practices for using cash and cards. We’ll help you make the best decisions for managing your money while you’re away.

2. Check Your Auto Insurance Plan

If you plan on renting a car, check with your auto insurance provider to find out if rental cars are covered in your policy. This can save you from purchasing unnecessary additional coverage. Contact AGCU Insurance to learn more about your insurance options

3. Pay Your Bills

Before heading out, make sure all of your monthly bills are paid up. You don’t want to be busy paying bills during your vacay or risk getting late fees. Log in to your AGCU account, or open one here to set up automatic payments for peace of mind.

4. Automate Your Email

Set up an automatic email response that lets people know you’re out of the office. This avoids appearing unprofessional or unresponsive and keeps your contacts informed.

5. Hold Your Mail

If you’ll be gone for a while, ask the USPS to hold your mail at the post office until your return. You can do this online and prevent your mailbox from overflowing.

6. Unplug Electronics

Pull the plug on all small appliances and electronics before you leave to prevent vampire energy leakage and potential fire hazards.

7. Clean Your Home

Before your departure, give your house a thorough cleaning. Dispose of any perishable food items from your refrigerator to avoid coming home to unpleasant odors. Consider eating or donating food that will expire while you’re away. You’ll be greeted by a spotless, clean-smelling house upon your return, and you’ll help avoid an invasion by ants or other critters.

8. Inform Your Mobile Service Provider

If you’re traveling abroad, check with your cellphone company about possible overseas service plans that allow you to use your smartphone for calls, texts, and internet access when on vacation.

9. Turn Off Your Water Supply

Avoid coming home to a flood by turning off your water supply before leaving. This simple step can prevent major water damage. This tip is especially helpful if you’re house is in a climate where pipes can freeze

10. Adjust Thermostats

If you have the AC blasting throughout the summer, remember to adjust your thermostat before leaving. Turning it off completely is unwise, as you’ll want some air to circulate to keep humidity under control and avoid mold growth. Also, set your hot water heater to vacation mode/setting.

11. Use a Timer for Lights

Keep the prowlers out by setting your lights to go on and off in different rooms and at different times of the day throughout your vacation.

12. Confirm Your Reservations

It’s a good idea to confirm your flight, hotel room, car rental, and attractions before setting out on your trip. This ensures you have everything in order and can avoid any last-minute surprises.

13. Exchange Currencies in Advance

If you’re traveling internationally, exchange some currency before you leave. This saves you from the hassle of finding a currency exchange service upon arrival and often provides better exchange rates.

14. Secure Your Home

Make sure all doors and windows are locked securely before you leave. Consider installing a home security system or using a security service to monitor your home while you’re away.

15. Inform a Neighbor or Friend

Ask a trusted neighbor or friend to keep an eye on your home. They can collect any packages, check your property, and ensure everything looks normal. Provide them with your contact information in case of emergencies.

16. Manage Your Subscriptions

If you receive any newspaper or magazine deliveries, pause these subscriptions to avoid them piling up and signaling to others that you’re not home.

17. Prepare for Emergencies

Leave a copy of your itinerary and important contact numbers with a trusted person. Make sure they know how to reach you in case of an emergency.

18. Double-Check Travel Documents

Ensure all your travel documents, such as passports, visas, and driver’s licenses, are up to date and easily accessible. Make copies of these documents and keep them in a separate location from the originals.

19. Check Weather Conditions

Check the weather forecast for your destination and pack accordingly. This can help you avoid unexpected weather-related issues and ensure you have the right clothing and accessories.

20. Pack a First Aid Kit

Include a basic first aid kit in your luggage. This should contain bandages, antiseptics, pain relievers, and any prescription medications you may need.

21. Back Up Important Data

If you’re taking electronic devices like laptops or tablets, back up important data before you leave. This ensures you don’t lose any vital information in case your device is lost or damaged.

23. Set Up Mobile Banking Alerts

Enable mobile banking alerts to monitor your accounts for any unusual activity. This allows you to quickly respond to any potential fraud or issues while you’re away.

24. Pack Smart

Make a list of all essential items you need to bring and check them off as you pack. Remember to include chargers for your devices, travel-sized toiletries, and any other necessities.

25. Review Health and Safety Guidelines

Check the health and safety guidelines for your travel destination, especially if you’re traveling internationally. Be aware of any vaccinations, health advisories, or safety concerns.

26. Plan for Pets

If you have pets, arrange for their care while you’re away. This could mean hiring a pet sitter, boarding them at a kennel, or asking a friend or family member to look after them.

By following these tips, you’ll be well-prepared for a relaxing and enjoyable trip. Safe travels!

Banking With A Purpose

Much more than a catchphrase, our tagline is our passion, our reason why we do what we do. This is the impact of your membership with AGCU.
Learn More About Banking with a Purpose

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What is a Credit Report?

Melanie Tarrant on July 18, 2024

Your credit report affects a dizzying array of things that go on in your life, so you really need to know what it is and what affects it. We’ve got the total breakdown!

Keeping Your Personal Information Up to Date

Melanie Tarrant on July 15, 2024

Having your current address, phone number, and email on file ensures that you receive important notifications and updates about your account. It also helps prevent your account from becoming dormant and potentially classified as unclaimed property.