We are buying a 2004 dodge durango. They were asking $19k for it and i got them down to $16k. Anyway we are financing and got some quotes. The one quote was $489 a month at 66 months with $3500 down. Thats $32000 payback! Am i missing something? I figured up 60 months @ $325 and $3500 down with 25% interest. Our credit score was in the 600 range. They let us have truck and are waiting till monday for a few more quates.
how does interest really work?
1bad69+70camaro
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We are buying a 2004 dodge durango. They were asking $19k for it and i got them down to $16k. Anyway we are financing and got some quotes. The one quote was $489 a month at 66 months with $3500 down. Thats $32000 payback! Am i missing something? I figured up 60 months @ $325 and $3500 down with 25% interest. Our credit score was in the 600 range. They let us have truck and are waiting till monday for a few more quates.
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I'm not a banker, but I do know there are at least two types of loan interests. Both use differant formulas and are charged differantly. Simple interest is charged based on your monthly balance, and the other is charged on a daily balance. Which as you seen can cost you ALOT more.
Check out a Credit Union. You may have to join it to get a loan, but well worth it.
Check out a Credit Union. You may have to join it to get a loan, but well worth it.
just so I understand this..you want to buy a 4 year old vehicle and put $3500 down.
You then pay for it for 7 years and it costs you $32,000 + $3500 you put down?
You then pay for it for 7 years and it costs you $32,000 + $3500 you put down?
A credit score in the 600 range is certainly not great, but you should be able to get a better rate than what has been quoted to you...that's not interest, that's usury.
As a reference point, give Capital One Auto Finance a try.
You can fill out an online application this afternoon from the comfort of your own computer while sipping a cup of coffee. Heck, I think you'd get a much better rate from them than what you have.
You can get an approval in minutes, and they'll Fed-Ex you, overnight, a check for your dealer.
http://www.capitalone.com/autoloans/loans/index.php?linkid=WWW_Z_Z_TG01_AC1_H1_02_T_ALNU
Regards,
-Greg
As a reference point, give Capital One Auto Finance a try.
You can fill out an online application this afternoon from the comfort of your own computer while sipping a cup of coffee. Heck, I think you'd get a much better rate from them than what you have.
You can get an approval in minutes, and they'll Fed-Ex you, overnight, a check for your dealer.
http://www.capitalone.com/autoloans/loans/index.php?linkid=WWW_Z_Z_TG01_AC1_H1_02_T_ALNU
Regards,
-Greg
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Thats what i said. The finance guy tried to explain but no mater how much they talked i never understood. I mean how does a $16k car end up being $32k with $3500 down?
I'd rather buy a 10 year old $3500 vehicle now then eventually have an 11 year old vehicle that ending up costing me $35,000
You'll be lucky if its worth the downpayment amount when all is said and done..
You'll be lucky if its worth the downpayment amount when all is said and done..
If you can follow it, here's the way they finance most things like cars and houses.
http://en.wikipedia.org/wiki/Rule_of_72
My father was in car sales for 20 years. They started training him to be an F&I(finance and insurance) mangaer but after a few weeks in, he told them there was no way he could screw people THAT bad so he turned the job down.
The F&I guy is the person you see after the salesman.
You basically have to work the rule backward starting with the term or the loan and the interest rate to get the monthly payment. It's confusing as hell and I don't even understand it myself.
http://en.wikipedia.org/wiki/Rule_of_72
My father was in car sales for 20 years. They started training him to be an F&I(finance and insurance) mangaer but after a few weeks in, he told them there was no way he could screw people THAT bad so he turned the job down.
The F&I guy is the person you see after the salesman.
You basically have to work the rule backward starting with the term or the loan and the interest rate to get the monthly payment. It's confusing as hell and I don't even understand it myself.
You know, I'm thinking there has to be some mistake here with what you've been told or how they explained it to you.
You say you got them down to $16,000 and you are putting $3,500 down.
That leaves you with $12,500 left to finance.
You said the monthly payment was going to be $489 for 66 months.
I just figured it out for you...that comes to over 42% interest.
(42.130% to be exact).
That cannot possibly be accurate. There is a maximum legal interest rate by law. I can't imagine that such an interest rate would be legal in any state.
You must be misunderstanding something or they must have misquoted something to you.
Regards,
-Greg
You say you got them down to $16,000 and you are putting $3,500 down.
That leaves you with $12,500 left to finance.
You said the monthly payment was going to be $489 for 66 months.
I just figured it out for you...that comes to over 42% interest.
(42.130% to be exact).
That cannot possibly be accurate. There is a maximum legal interest rate by law. I can't imagine that such an interest rate would be legal in any state.
You must be misunderstanding something or they must have misquoted something to you.
Regards,
-Greg
Yes aren't money lenders wonderful people. The loan is legal due to what the financial institutions call loan amortization. Here is some information,
http://www.mortgage-x.com/library/answers/amortization.asp
http://www.mortgage-x.com/library/answers/amortization.asp
1BAD,
I’m not a banker either but I’d like to build on 4speeds suggestion.
First let’s talk interest or better yet the true cost of financing this truck. You’re financing $12,500.00 after your down payment of $3500.00 as you stated your payback is $32,274.00. That would put the interest somewhere around 28% but the ugly part is that comes to $19774.00 in interest charges. Think of this; every month you send that payment of $489.00 to the bank $300.00 of it is interest, only about $189.00 go’s to pay off the truck. What really hurts is the length of the loan (66 months).
I’d try to avoid Capital One as they have been under investigation for their business practices for years. As stated above a score of 600 is really costing you some bucks here so let’s expand on 4speed’s idea.
The truck is four years old and you’re going to finance it for five and a half years. Think it will live to nine and a half or 10 years? Without major repairs, is it four wheel drive, there pricey to repair? I’m sure I’m not telling you anything you don’t already know, but hang with me.
Back to 4speeds thoughts, find yourself a good $3500.00 something but then put the $489.00 into saving. If the $3500.00 something doesn’t hold up in seven months you’ll have the cash to buy another one. Think long range at the end of the same 66 months you could have $35,000.00 in savings or a bunch of bills paid off and possibly a much better credit score.
Hope this helps, not what you ask for I know, but you can always just hit the delete key.
Kevin
I’m not a banker either but I’d like to build on 4speeds suggestion.
First let’s talk interest or better yet the true cost of financing this truck. You’re financing $12,500.00 after your down payment of $3500.00 as you stated your payback is $32,274.00. That would put the interest somewhere around 28% but the ugly part is that comes to $19774.00 in interest charges. Think of this; every month you send that payment of $489.00 to the bank $300.00 of it is interest, only about $189.00 go’s to pay off the truck. What really hurts is the length of the loan (66 months).
I’d try to avoid Capital One as they have been under investigation for their business practices for years. As stated above a score of 600 is really costing you some bucks here so let’s expand on 4speed’s idea.
The truck is four years old and you’re going to finance it for five and a half years. Think it will live to nine and a half or 10 years? Without major repairs, is it four wheel drive, there pricey to repair? I’m sure I’m not telling you anything you don’t already know, but hang with me.
Back to 4speeds thoughts, find yourself a good $3500.00 something but then put the $489.00 into saving. If the $3500.00 something doesn’t hold up in seven months you’ll have the cash to buy another one. Think long range at the end of the same 66 months you could have $35,000.00 in savings or a bunch of bills paid off and possibly a much better credit score.
Hope this helps, not what you ask for I know, but you can always just hit the delete key.
Kevin
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FYI, most if not all states have abolished the old usury laws.
Several excellent pieces of advice you should take so far -
Don't pay for a used car for more than a couple years.
Watch out for the "monthly payment" trick. They give you a monthly payment that you feel you can afford, so you forget just how many years and $$ you are really paying them.
Go to your credit union if you have one, but either way shop around at a several local banks.
If you have Excel, open it up.
In cell A1, put the amount you are financing.
In cell A2, put the ANNUAL interest rate you would like to pay. (you can change this to see the impact). Don't put in the % key, don't figure out the decimals. For example, for 10%, type 10 in the cell.
In cell A3, put the number of MONTHS you want to finance over.
In cell A4, put the formula below, exactly as I've typed it: (yes, there are two commas in a row near the end)
=-PMT(A2/100/12,A3,A1,,0)
The result is your monthly payment. Note you can type in new numbers and see the impact instantly.
In your example, $12,500 is the amount your are financing
Put in a credit card interest rate just for fun. Let's say 21%
# of months = 60 (5 years).
Your result in the above example should be $338.17 if you've done the spreadsheet correctly.
Several excellent pieces of advice you should take so far -
Don't pay for a used car for more than a couple years.
Watch out for the "monthly payment" trick. They give you a monthly payment that you feel you can afford, so you forget just how many years and $$ you are really paying them.
Go to your credit union if you have one, but either way shop around at a several local banks.
If you have Excel, open it up.
In cell A1, put the amount you are financing.
In cell A2, put the ANNUAL interest rate you would like to pay. (you can change this to see the impact). Don't put in the % key, don't figure out the decimals. For example, for 10%, type 10 in the cell.
In cell A3, put the number of MONTHS you want to finance over.
In cell A4, put the formula below, exactly as I've typed it: (yes, there are two commas in a row near the end)
=-PMT(A2/100/12,A3,A1,,0)
The result is your monthly payment. Note you can type in new numbers and see the impact instantly.
In your example, $12,500 is the amount your are financing
Put in a credit card interest rate just for fun. Let's say 21%
# of months = 60 (5 years).
Your result in the above example should be $338.17 if you've done the spreadsheet correctly.
just noticed..my bad on the 7 years :clonk: (should have typed 5.5 years..duh)
Heck,buy a $3500 vehicle and bank the payment you would have been making as Kevin mentioned.
Heck,buy a $3500 vehicle and bank the payment you would have been making as Kevin mentioned.
A little bit on the process.
The dealer is in the business of profit. When you sit with the salesperson, he brings out a sheet of paper called a 3 or 4 square. It has boxes for "price", "trade", and payments. You will show the salesman(salesmanager) where your main interest are. If you spend all your time on price, they'll work the trade. If you have no trade, they'll work the payment.
The finance dept. has a 1/2 dozen or more places for your loan that are legit financial institutions, and a few less legit. The legit ones are for new and near new cars, and cater to people with good credit. New cars have warrentees, and good credit proves to them a good posibility of payoff. These Companies may have rates of 7%, and allow the dealer to add on a maximum of 1-2% Fee for which the dealer is paid by the lender. So, the finance manager quotes 9%. If that is agreeable to you, the deal is done, and the dealer gets 2% of the loan deal back. A $20k loan/+2% can net the dealer and xtra $2 grand.
If you are buying used, mileage is a big deal in the finance biz. Below 60,000 with a warrentee for the life of the loan "MAY" get you prime. However, when you get beyound the 60K mile mark, and/or under certain credit scores, you get into the other finance resourses, and rates go up, usually 12 to 19 or so. These people don't have the same kick-back limits as the prime lenders. The sky's the limit. Before you sat down, the finance guy knew who would buy his loan, and his "JOB" is to make money on this deal. Especially if you beat them out of it on the price. The finance guy adds interest on and presents it. If you sign, it a deal. The money you think you beat them out of, wheither it be price, or trade, is back in the folder. It's the way it works. They are not a non-profit organization.
The dealer is in the business of profit. When you sit with the salesperson, he brings out a sheet of paper called a 3 or 4 square. It has boxes for "price", "trade", and payments. You will show the salesman(salesmanager) where your main interest are. If you spend all your time on price, they'll work the trade. If you have no trade, they'll work the payment.
The finance dept. has a 1/2 dozen or more places for your loan that are legit financial institutions, and a few less legit. The legit ones are for new and near new cars, and cater to people with good credit. New cars have warrentees, and good credit proves to them a good posibility of payoff. These Companies may have rates of 7%, and allow the dealer to add on a maximum of 1-2% Fee for which the dealer is paid by the lender. So, the finance manager quotes 9%. If that is agreeable to you, the deal is done, and the dealer gets 2% of the loan deal back. A $20k loan/+2% can net the dealer and xtra $2 grand.
If you are buying used, mileage is a big deal in the finance biz. Below 60,000 with a warrentee for the life of the loan "MAY" get you prime. However, when you get beyound the 60K mile mark, and/or under certain credit scores, you get into the other finance resourses, and rates go up, usually 12 to 19 or so. These people don't have the same kick-back limits as the prime lenders. The sky's the limit. Before you sat down, the finance guy knew who would buy his loan, and his "JOB" is to make money on this deal. Especially if you beat them out of it on the price. The finance guy adds interest on and presents it. If you sign, it a deal. The money you think you beat them out of, wheither it be price, or trade, is back in the folder. It's the way it works. They are not a non-profit organization.
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You might want to run from that deal. I sure would. Go to a credit union or bank and get your own loan.
the interest rate's an length are dependent on what YOU SIGN !! if you don't read carefully you can an will get SCREWED :yes:
I'd return the truck first thing Monday !! there should be some kind of Buyers remorse clause .. most states have them for the first 72 hours
I'd return the truck first thing Monday !! there should be some kind of Buyers remorse clause .. most states have them for the first 72 hours
Do not I say DO NOT ever go into a deal with out your own financing! My credit union is charging 6% on on 4 year old car right now.
I would never finance a car for more than 3 years. If you can't pay for it in 3 years, you can't afford it, period!
I would never finance a car for more than 3 years. If you can't pay for it in 3 years, you can't afford it, period!
I second, 3rd or 4th the credit union thing. When I bought my first financed car almost 5 years ago (its almost paid off, yaay) I had crappy credit. I still got a rate of 15%. Once I got a few things cleared off my credit, such as an account in collections which I paid off 5 years earlier, I went back to them and for $30 they dropped my interest rate down to 11 or so.
That almost sounds typical from a bank. They get all the surcharges, fees for this and fees for that, even fees to deposit your money with them if you're not paying attention. On top of that they charge sky high rates yet pay only pennies of interest to your savings account. Don't walk away from this "deal" but run.
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