funat9000rpm

I'm gonna go ahead and take a stab at this: (please don't mind the personal questions)

1.) How old are you?
2.) What job do you hold?
3.) (and this is the big one) How credit worthy are you? (previous defaults, credit history problems??)
4.) Did she tell you how the loan is compounded? (annual, semi-annual)

Presto123

zing!

QUIKAG

12.5% is probably pretty good on a car that old with the money being loaned to a guy who doesn't even know how interest rates work (nothing personal, but it's a fact based on your subject line).

Saki GT

https://www.penfed.org/productsAndRates/loa...s/autoLoans.asp

dombey

you're obviously not a member of the generation that brought us subprime mortgages, equity lines of credit, and zero percent balance transfer offers.

I'm happy to hear you added the payments together to get a real picture of what the car is going to cost you; 90% of people never do that.

At a minimum, you should buy private party. On a 2001, it is out of warranty and there is, IMO, nothing to justify buying from a dealer and paying sales tax.

I'll tell you what though...it's a hell of a lot cheaper to buy a new car w/ a low interest rate (if you qualify) than to buy a used car w/ a personal loan. You won't get as capable of a car, but you will get a lot more modern features, fewer maintenance expenses, better mileage, lower interest, etc.

bankstreet

You are not pay a total of 12.5% interest over the 5 years but 12.5% every year on your outstanding balance. Each year you will pay about $4050 in payments but the first year you will have to pay about $1875 in interest so your balance will only go down $2175. At the end of the first year you will still owe the bank $12800 and they will charge you 12.5% on that balance again but the second year you pay a little less interest (because the balance is lower) and more of your payment will go towards paying down the balance. Repeat this for 5 years.

mxt_77

It's probably already been covered, but the interest number is APR... Annual Percentage Rate. So, you're paying 12.5% of the balance every year. But since it's compounded monthly or daily , it could technically end up being even more than 12.5% (depending on how the average balance is calculated).

So, from your original post, what you expect is:
15000 + 12.5% = 16875

That's not the way compounded interest works. Generally, I think auto loans are compounded monthly, based on the average balance during the month (but I'm not 100% sure, and it could vary).

So, compounded monthly means that your first month's interest rate is 12.5% divided by 12 months = ~1.04%.

So, the first month, you would accrue : 15000 * 0.0104 = $156 in interest. If your payment is $337, then $156 goes to interest, $181 goes to principal.

$15000 - $181 = 14819 (this is your new balance for month 2).

So, Month 2 you will accrue: 14819 * 0.0104 = $154.1176 in interest... and so on and so forth.

But thanks to the magic of compounding interest, that 12.5% APR means that you pay much, much more interest than 12.5% of the original loan amount.

mxt_77

Or c) shorten the term of the loan.

mxt_77

It's a 10 year old car. Banks don't offer good rates on cars that old.

Ryan2949

Here in Ontario we have a 13% sales tax, even on private car sales we have to pay that 13% tax.

The main reason why it's 12.5 is the fact that it's 10 years old. It would be 7% if the car were newer, according to her. The fact that it's a private sale also brings it up.

I'm going to try a few other banks to see what they will offer, I do have around 2,000 saved up that I could use for a down payment, but I think I'd rather have that incase something happens.