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I can't understand how they got these numbers.... Help me please

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tinkytoo
Regular Contributor

I can't understand how they got these numbers.... Help me please

Could someone please help me to understand what happened to me earlier. I went to a dealer looking to buy a reasonable car under 10,000. I knew that mycredit is bad but I need a newer car, the car I have is not dependable, Im starting my nursing clinical rotation soon and the car I have keeps breaking down and I can't miss no days or be late or I will be kicked out the program. I get one thing on my current car fixed then something else breaks. So I go to the dealer my equifax score is 552 by them and 562 on myfico. I was very well expecting a high interest rate was gonna still get a car if approved, then try and refinance once my scores improve. Now here's what I was approved for, a 2007 Kia Spectra, 59000 miles for 9460.00. I liked the car cause its way better than my grand am. The guy that's trying to finance me says that I will pay 392.00 a month for 48 months. I said no I wasn't gonna pay that he goes back and speak with his manager and came back with 377.00 for 48 months I said no again. I  asked him what the interest rate was he says I guess 24.95% so I pull out my cell phone for my calculator cause even with that APR I still found it high. My calculations was 377*48 months came to about 18096 for the duration of the loan that's a 50% profit. Please someone explain was his calculations right or mine because I would have thought the payments would have been cheaper. Well when he see I aint budging he says okay I give 325 a month for 51 months with gap insurance this still seems high to me how did they get those figures. Can anyone help me, Oh I forgot I told them no way I would give them a 50% profit over the term of he least so I turned and left without the car. I guess Ill just keep praying to the almighty that something good and worthwhile come my way, until then I will have to keep my beater. Thanks to any and everyone who reply to my post

Message 1 of 10
9 REPLIES 9
leah5570
Frequent Contributor

Re: I can't understand how they got these numbers.... Help me please

Well for one your total of interest would be for the life of the loan. Carrying an interest rate like that for the duration of the loan does equal higher interest and lower prinicipal payments each month.

 

If you really need a car, and the credit scores are what they are, it would be up to you to agree, and continue on your plan for higher credit scores and look for a refi. Mind you even if you pay for six months on the "bad" loan, you'll be upside down due to most of your monthly car payment being for interest and not the principal, so be prepared for saving a little money on the side to put up when you look for a refi.

 

Hope this helps. Best of luck!


EQ. Starting Score 08/19/12: 545
EQ. Current Score 09/02/13: 611
Goal Score: 700


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Message 2 of 10
Anonymous
Not applicable

Re: I can't understand how they got these numbers.... Help me please


@tinkytoo wrote:

Could someone please help me to understand what happened to me earlier. I went to a dealer looking to buy a reasonable car under 10,000. I knew that mycredit is bad but I need a newer car, the car I have is not dependable, Im starting my nursing clinical rotation soon and the car I have keeps breaking down and I can't miss no days or be late or I will be kicked out the program. I get one thing on my current car fixed then something else breaks. So I go to the dealer my equifax score is 552 by them and 562 on myfico. I was very well expecting a high interest rate was gonna still get a car if approved, then try and refinance once my scores improve. Now here's what I was approved for, a 2007 Kia Spectra, 59000 miles for 9460.00. I liked the car cause its way better than my grand am. The guy that's trying to finance me says that I will pay 392.00 a month for 48 months. I said no I wasn't gonna pay that he goes back and speak with his manager and came back with 377.00 for 48 months I said no again. I  asked him what the interest rate was he says I guess 24.95% so I pull out my cell phone for my calculator cause even with that APR I still found it high. My calculations was 377*48 months came to about 18096 for the duration of the loan that's a 50% profit. Please someone explain was his calculations right or mine because I would have thought the payments would have been cheaper. Well when he see I aint budging he says okay I give 325 a month for 51 months with gap insurance this still seems high to me how did they get those figures. Can anyone help me, Oh I forgot I told them no way I would give them a 50% profit over the term of he least so I turned and left without the car. I guess Ill just keep praying to the almighty that something good and worthwhile come my way, until then I will have to keep my beater. Thanks to any and everyone who reply to my post


I had the same issue going. Here is what helped me. I have not found a better way to understand it than this. I have not seen any better way to have this laid out or understand it. Click the following link. It will take you to an auto loan calculator. There will be a box asking four things

 

1. Auto Loan Amount (amount being financed)

2. Auto Loan Term either fill in years or number of months and it will fill in the other

3. Interest Rate

4. Date of Loan Start (for the sake of illustration just put in todays date to see the example)

 

Now when you fill in these four items leave the fifth box (Monthly auto loan payments blank and click on calculate. It will automatically fill in the monthly auto loan you SHOULD pay based on everything entered. So to get the right payment all four things above have to be correct. Now when you see your monthly payment that is step 1.

 

Scroll down a little and you will see another box. Click on the SHOW/RECALCULATE AMMORTIZATION TABLE button. When you click this button it will show you a monthly payment schedule starting with your first payment all the way until the last. It will show you the monthly payment, the amount of that payment that goes to interest (total profit for them and doesnt affect your balance at all) and then it will show you the amount that goes toward principal. THe principal is what you owe. Then it will show you the new principal amount (the amount you now owe). Your interest goes down every month as the interest is calculated EVERY month based on the amount owed. So since you owe less each month you pay less interest and more principal every month. If you go all the way to the bottom it will show you the total amount you will have paid if you carry the loan to term and show you how much was interest and how much was principal. I encourage you to check this out I think it will help you greatly.

 

@Now when I put in your $9460 for 48 months @ 24.95% interest it gives a monthly payment of $313.40. It show you will pay a total of $15043.33 with $9460.00 on the loan and $5583.33 total paid in interest.

 

Now there are two explanations on the possible variation in numbers that you have.

 

1. If he said "I guess" at the interest rate thats not good enough. MAKE him give you the EXACT interest rate IN WRITING. Now this will allow you to see the exact monthly payment you should pay not the "I guess" amount.

 

2. Your monthly payment could still vary if they force you to pay GAP or other insurance. If they are including this then you have to understand that doesnt go toward the car loan itself. So in your example you said $377 for 48 months for a total of $18096 paid. You have to realize anything above the $313.40 (assuming the interest rate is correct) could be fees and insurance. So if you take the $313.40 x 48 months your total is $15043.33. So if the difference is GAP insurance that is a $63.60 monthly insurance payment. multiply that by 48 and you get a total of $3052.80 in GAP insurance.

 

So get the EXACT intrerest amount. Make him break down the payment EXACTLY for you. Make him tell you how much the ACTUAL loan payment is and how much of the additional is made up of fees or insurances. He has all of this info but they try to hide it so you dont see all of the reality and numbers. MAKE him show you. If he wont RUN to another dealer. Any honest and worthy dealer will break this down to the penny if you ask.

 

I hope this helps and if you have any further questions or need anything clarified fire away.

Message 3 of 10
leah5570
Frequent Contributor

Re: I can't understand how they got these numbers.... Help me please

Not to drag this away but if the numbers the salesguy gave were right, $63.60 a month for GAP is ridiculous. I just bought an '07 Trailblazer and GAP for a $17k loan is $7 and change per month. We have GAP on our Sonata and it's definately less than $10 a month if I remember right.

 

+1 okstatefan5945


EQ. Starting Score 08/19/12: 545
EQ. Current Score 09/02/13: 611
Goal Score: 700


Take the FICO Fitness Challenge

The effects of waking a sleeping giant...
Message 4 of 10
Anonymous
Not applicable

Re: I can't understand how they got these numbers.... Help me please

I agree with you totally Leah. That is why I think this deal needs to be broken down exactly to the penny. Something doesnt add up here. We are missing something here or the 24.95% "I guess" rate is way off.

Message 5 of 10
Anonymous
Not applicable

Re: I can't understand how they got these numbers.... Help me please

 


@tinkytoo wrote:

Could someone please help me to understand what happened to me earlier. I went to a dealer looking to buy a reasonable car under 10,000. I knew that mycredit is bad but I need a newer car, the car I have is not dependable, Im starting my nursing clinical rotation soon and the car I have keeps breaking down and I can't miss no days or be late or I will be kicked out the program. I get one thing on my current car fixed then something else breaks. So I go to the dealer my equifax score is 552 by them and 562 on myfico. I was very well expecting a high interest rate was gonna still get a car if approved, then try and refinance once my scores improve. Now here's what I was approved for, a 2007 Kia Spectra, 59000 miles for 9460.00. I liked the car cause its way better than my grand am. The guy that's trying to finance me says that I will pay 392.00 a month for 48 months. I said no I wasn't gonna pay that he goes back and speak with his manager and came back with 377.00 for 48 months I said no again. I  asked him what the interest rate was he says I guess 24.95% so I pull out my cell phone for my calculator cause even with that APR I still found it high. My calculations was 377*48 months came to about 18096 for the duration of the loan that's a 50% profit. Please someone explain was his calculations right or mine because I would have thought the payments would have been cheaper. Well when he see I aint budging he says okay I give 325 a month for 51 months with gap insurance this still seems high to me how did they get those figures. Can anyone help me, Oh I forgot I told them no way I would give them a 50% profit over the term of he least so I turned and left without the car. I guess Ill just keep praying to the almighty that something good and worthwhile come my way, until then I will have to keep my beater. Thanks to any and everyone who reply to my post


 

Smart to walk away.

 

Words mean nothing.  He was probably padding the loan with additional fees.

 

Maybe talk to a credit union?  If you can get 3rd  party financing ahead of time then that will simplify the transaction.

 

On the other hand, if your car is costing less than $350 a month in repairs it's still cheaper than getting another car.  OTOH, there's the reliability factor, and perhaps the beater that you buy will prove to be no more reliable than the beater that you send to the glue factory.

 

 

 

 

 

 

 

Message 6 of 10
tinkytoo
Regular Contributor

Re: I can't understand how they got these numbers.... Help me please

Hi okstatefan5945

 

I tried to click on the link but I can't if its not a problem can u repost it. Thank you so very much. And to all the wonderful peolpe who replied to my post I thank each and everyone of you without this forum I would be lost in this messy cruel credit world had I not been reading this form and learning little by little I know I would have taken that loan and not thought anything of it  but thanks to you I didnt. I will just wait a little longer and try and join a credit union to get a better deal. 

Message 7 of 10
Anonymous
Not applicable

Re: I can't understand how they got these numbers.... Help me please

Sorry I just looked and I completely forgot the link here it is:

 

http://www.bankrate.com/calculators/auto/auto-loan-calculator.aspx

 

Try that. It was really an eye opener for me.

Message 8 of 10
mygoal750
Contributor

Re: I can't understand how they got these numbers.... Help me please

they are probably including insurance on that payment (life and disability).  That coverage would make the payments if you're disabled or die during the term.  That insurance is very expensive, and could cause up to $40/month payment difference.  Ask him to take out the insurance coverage.  As recommended earlier, I would keep the GAP coverage, but ask them if there is a cheaper alternative than what he quoted. 

Message 9 of 10
tinkytoo
Regular Contributor

Re: I can't understand how they got these numbers.... Help me please

thanks everyone this has really helped me.

Message 10 of 10
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