calculate vehicle financing?

Question

I am in the process of helping my mother purchase a new vehicle.. Opinions aside about purchasing new, I need help calculating the monthly payments.

We have the price negotiate to where we want it but right now we're playing the numbers game with the interest rate. I have taken their quoted monthly payment and plugged in all the info to various "Auto Loan Calculators" on the net and all of them say different things.. What I'd like to do is, while at the dealer prior to signing, is to sit down and calculate what her payments SHOULD be vs. what they say it will be. Unfortunately I will be without the aide of a computer, only a calculator. I just want to verify that their not padding the monthly payments.

Thanks!

Answer 1

You need to run a loan amortization. You cannot figure the interest rate by merely taking a percentage of the sale price, which I gather you know otherwise you wouldn't be asking here. You may be able to find it if you have MS Office. I have it, but without knowing the particulars of your deal I can't help much.

If you want to email me the particulars I'll give you the exact payment to the penny.

I'll need to know the final price, including all tax, titile, lic fees.

Any money that you'll be putting down.

The interest rate.

The term (60 mos, 72)

For example:

If you are financing 18750.56 for 60 mos at 7.25% your payment would be:

373.50

If you made every payment as scheduled you'd pay 3659.39 in finance charges to the bank.

Many times, a dealer will (quite unethically, btw) add a "leg" to your payment, saying that, in the above scenario, your payment would be 385-390. You agree, thinking that that is a good payment, something you can afford. Then you go see the Finance & Insurance Manager to finalize the paperwork. He's going to sell you (or try and sell you) an extended warranty, service plan, gap ins. and other stuff. These all cost money. But he's able to hide the true monthly burden b/c they've already added a leg to your payment. So you might end up paying only 10-15 more a month (a perceived good value for what they're offering) b/c they already committed you to a higher payment than you deserve. It's much easier to get a "bump" in the montly payment if it's only 10-15 bucks instead of 30.

So, you agree to purchase thinking that the payment is 390. In reality, the numbers work to 373.50 (but you don't know that). The F&I manager sells you all his stuff and tells you the final payment will be 405. Not bad. Only 15 more a month but you get tons of warranty, gap, alarm, etc.....

But would you have bought it if you know that you'd be agreeing to 30 bucks more a month? Because in reality that's what's happening.

Now, not all dealers do this. But enough do b/c there's a ton of money that can be made "on the back end" especially on new cars that are sold for 0 profit "on the front"

If you can't find a loan amortization on your pc, or via google, email me the particulars and I'll tell you EXACTLY what your payment will be.

good luck

Answer 2

That's the problem with getting financing at a dealer -- they start talking payments to obscure the actual costs. Unless you're bringing a scientific calculator and have some scratch paper, it's not something you want to calculate on your own.

I would recommend your mother get pre-approved for a loan through a bank or credit union. That way you'll already have the interest rate and loan length set and the only figure you'll need to negotiate with the dealership is the cost of the car.

P.S. Here is a very simple, straightforward amortization calculator if you want to play around with some numbers.
http://www.hsh.com/calc-js-synd.html

Answer 3

First find out if it is annual or compounded.suppose the car is 10,000 and the interest is 10% the interest on the term of the loan would be 1000. You need to know the specifics as well as myself to really be able to help. If buying used beawar that some unscuplous dealers charge the same amount for the length of the loan even the the principple is gooing down. If all else fails get the numbers from them and tell them you need to check the figures. if they are on the up and up they will agree without problem if not they may throw around ultimatuims. As they say buyer beware. Once you signed that paper and the number of days has gone by you have no recourse.

Answer 4

I sell cars and heres what to do. if she has good credit, call the bank where she has her checking acct at. find out what kind of rate they can offer her, and what payments they come up with. when you go back to the dealership, if the dealer can match or beat use them. when you get into the finance office they have to disclose everything to you( int rate, term, everything) of they cant match the rate get the money from a local bank.