How much interest does one actually pay when financing?

[staticorex]

That's my question.

If you buy a $20,000 car for five years of payments at say 7%. How much do you actually end up paying in interest?

Is it 7% of 20,000? or 7% of your remaining balance? And is that calculated each month?

I'm just trying to figure out what one pays for buying a car now rather than saving up for it.

Thanks to all those who give me answers.

[severous01]

it's right there on the loan breakdown. there's a section.

you should do a loan calculator. one that's more than just a price/rate/note thing. or you can do the price/rate/note and then do a price - price+financing thing.

there's a lot of loan calculator things out there. some more detailed than others. find one that will break it all down.

[tomato]

I don't know how it works for cars, sorry. I bought my car used, so, did not use financing.

it's a good question and you should ask that **** BEFORE ***** you sign the papers !

[nemelek]

Summary
Principal borrowed: $20,000.00
Regular Payment amount: $396.02
Final Balloon Payment: $0.00
Interest-only payment: $116.67
*Total Repaid: $23,761.20
*Total Interest Paid: $3,761.20
Annual Payments: 12
Total Payments: 60 (5.00 years)
Annual interest rate: 7 .00%
Periodic interest rate: 0 .5833%

You can find amorization scheduals in different places. This one came from http://www.bretwhissel.net/cgi-bin/amortize

The interest is recalcuated every month on the outstanding balance. The more you pay early the more you save in interest. Everybody's situatation is different. I don't like car payments and will pay cash. To live on yesterday's money instead of tomorrows money is a great place to be in life.

It's great that you are asking this question.

[staticorex]

Thank you nemelek.


I don't have a loan on may car, I never buy something with financing. That's why I didn't know how it worked. I was just trying to get an idea of how it works for my own interest.

I agree that it's not a good idea to live on tomorrow's money. I was raised "If you can't afford it you don't buy it", so I've always payed cash.

This was all started because a guy with a TC was bashing on me for buying a Yaris. I was trying to find out what he was paying in interest so I could figure out if I spent the same amount he spent on interest on after market parts, if our cars would be mostly equal anyway.
IE, he spends 4k on finance charges and I buy a supercharger and some suspension so we pay the same but have roughly the same car.

[annn]

"To live on yesterday's money instead of tomorrows money is a great place to be in life".


Oh I agree 100% !!

[severous01]

if it's not below 2% i wont buy it.

he's paying 3500 to borrow 20k. the bigger your down payment, and if you can swing principle payments you'll pay less unless they have a clause for paying all the interest. but there's so few companies out there that will force you to pay the full amount and then penalize you for making early or more than contracted payments out there. most of those companies are sharks and likely have more than 25% interest rates. stay away from them

another thing, check before you sign that it's ok to make more than agreed payments or higher than agreed payments. i pay 220/mo for my car, but my loan amount is 185. so i'm putting 45 more per month down. it's a 4 yr loan and it will be paid off in 3 with these payments. since i've started making more money i have even started paying 250/mo...but when im in a pinch i can always go back to paying my 185 if i have to.

[STC]

Originally Posted by annn

"To live on yesterday's money instead of tomorrows money is a great place to be in life".


Oh I agree 100% !!

^ +1

If we and the people we look up to in higher tophat statures followed this rule... then our economy and the world economy would be in better place!

Cheers!

[severous01]

Originally Posted by STC

^ +1

If we and the people we look up to in higher tophat statures followed this rule... then our economy and the world economy would be in better place!

Cheers!

that will NEVER happen....

[rick996]

"To live on yesterday's money instead of tomorrows money is a great place to be in life".

There were no cash incentives when I bought mine. The only incentive was 0% interest on a 3 year loan so I took it. In my case paying with tomorrows money will be cheaper due to inflation . But I do follow that rule on everything else .

[staticorex]

^^ Not so long as greedy Americans "NEED IT NOW!!"as it so often is.

[staticorex]

Originally Posted by rick996

There were no cash incentives when I bought mine. The only incentive was 0% interest on a 3 year loan so I took it. But I do follow that rule on everything else .

That's the only time I would consider payments.

[nemelek]

The cost of transportation isn't cheap. To buy new vs used, cash vs finance are situatations that are different for each buyer. My self and most others on this forum are trying to drive as economically as possible.

[TickleTimeTim]

orrrrr, you could borrow all the money the world has to offer, live an awesome next couple of months, and watch the world end in 2012 from the rear view mirror of your new ferrari.

[Yaristeve]

Life is too short to quantify everything in terms of dollars and cents. How you define "able to afford it" is different for everbody. How do put a price on "enjoying life"? If paying $3,500 in interest (a paltry $700 per year over that 5 year loan or even more piddly $350per year over the 10-year life of the car) makes you happy, and you can afford it, why shouldn't you?

The popular saying is, "He who dies with the most toys, wins" is incorrect. It should be, "He who dies with the most debt, wins".

[tomato]

*can afford it * is the key word, there.

As to the world ending in 2012... I don't know but I'm feeling like making some bets here. I bet you each $5 that it won't. Ah, what the heck, it's the end of the world, we're talking about. How about $500. If the words end, you win. If it doesn't, I keep the $500.

So, who's in?