Auto Loans

[rootpooty]

So I purchased a car late 2010 for 19000. The loan is 451.78 for 60 months @ 8.2%. I've made 20 payments so far so roughly I've paid 9000 towards the loan. I called yesterday to see what the payoff is and was told 17095! Right away I ask why so much and they explained to me that for the first year all the payments I've made went to interest only and now my payments will start to go to the principle. So even if I wanted to pay the loan off now I wouldn't save a dime. Is this how all auto loans work or did I get the shaft from this bank?

[StartingOver10]

Do you have a copy of your car note?  Pull out your copy and read it carefully.

There are lenders, especially those at Buy Here Pay Here type places (and other auto places) that loan the money under a different kind of note. A long time ago they used to call these types of loans "Rule of 78's".  Now however, the loan is called by a whole variety of names including "Add on Interest". What that means is they take the principal amount and multiply it by the interest rate and "add on the entire interest amount" to the principal amount. And yes, you pay the interest upfront and don't get to the principal balance until several years later (usually after 2 yrs or so). There are restrictions on these type of loans. They restrict the term of the loan and in some states they may even restrict the interest rate. You would have to look up your state's statutes to see what the restrictions are where you live.

 A "regular" car loan is one where the interest is simple interest and each payment consists of a portion paid to the interest that accrued since your last payment and a little bit of principal repayment (if any money remains from the payment you made).

Please read your loan so you know what you have commited to when you signed the note.

Once you read the note, find your state's statutes to see if what they are doing is legal. You may need an attorney to help you.

[MarineVietVet]

---

rootpooty wrote:
So I purchased a car late 2010 for 19000. The loan is 451.78 for 60 months @ 8.2%. I've made 20 payments so far so roughly I've paid 9000 towards the loan. I called yesterday to see what the payoff is and was told 17095! Right away I ask why so much and they explained to me that for the first year all the payments I've made went to interest only and now my payments will start to go to the principle. So even if I wanted to pay the loan off now I wouldn't save a dime. Is this how all auto loans work or did I get the shaft from this bank?

---

So is $19,000 the total amount financed or the sales price without TT&L etc.? I ask because when I run an auto loan calculator for $19,000 for 60 months @ 8.2% I get a monthly payment of $387.07.

Edited for typos.

[LS2982]

---

rootpooty wrote:
So I purchased a car late 2010 for 19000. The loan is 451.78 for 60 months @ 8.2%. I've made 20 payments so far so roughly I've paid 9000 towards the loan. I called yesterday to see what the payoff is and was told 17095! Right away I ask why so much and they explained to me that for the first year all the payments I've made went to interest only and now my payments will start to go to the principle. So even if I wanted to pay the loan off now I wouldn't save a dime. Is this how all auto loans work or did I get the shaft from this bank?

---

You would have to review your paerwork on it.. I know if your pying more than the contracted monthly amount whatever extra you paying along with the original amount is being applied to the principal balance.

[pizzadude]

---

rootpooty wrote:
So I purchased a car late 2010 for 19000. The loan is 451.78 for 60 months @ 8.2%. I've made 20 payments so far so roughly I've paid 9000 towards the loan. I called yesterday to see what the payoff is and was told 17095! Right away I ask why so much and they explained to me that for the first year all the payments I've made went to interest only and now my payments will start to go to the principle. So even if I wanted to pay the loan off now I wouldn't save a dime. Is this how all auto loans work or did I get the shaft from this bank?

---

Definately check your paperwork.    If this was a traditional auto loan then you would have had to borrow ~$22,300 @8.2% for 60 months to have a payment of $450/month. 

[webhopper]

If you financed 19,200 at 18.2% for 60 months with 1500 down you would have a payment of 451.36.

Seeing the cards in your signature on here, are you sure you got 8.2%? Who is your finance company? I e heard if Santander screwing people like this....

[FrugalRican]

Sounds like it might be time to refinance, as well, somewhere else.

[rootpooty]

It's def 8.2% financed by Huntington national bank out of Ohio. When I get home il get the car note out and go over it carefully. I live in Indiana but the bank is in Ohio so which state statue should I look up? My main question is can a bank apply 100% of payments to interest first then get to the principle? Right now refinancing would be pointless cause according to the bank starting 3 months ago 100% of my 451.00 payment is going to the principle.

[pizzadude]

---

rootpooty wrote:
It's def 8.2% financed by Huntington national bank out of Ohio. When I get home il get the car note out and go over it carefully. I live in Indiana but the bank is in Ohio so which state statue should I look up? My main question is can a bank apply 100% of payments to interest first then get to the principle? Right now refinancing would be pointless cause according to the bank starting 3 months ago 100% of my 451.00 payment is going to the principle.

---

If this is the case then you did not get a traditional car loan with simple interest, even with high interest rates some portion of each payment is allocated to principle every month.      In terms of being legal, if you signed the contract then you are bound to the terms....

[StartingOver10]

---

rootpooty wrote:
It's def 8.2% financed by Huntington national bank out of Ohio. When I get home il get the car note out and go over it carefully. I live in Indiana but the bank is in Ohio so which state statue should I look up? My main question is can a bank apply 100% of payments to interest first then get to the principle? Right now refinancing would be pointless cause according to the bank starting 3 months ago 100% of my 451.00 payment is going to the principle.

---

Post the paragraph that details how the payments will be applied. Leave out any personally identifying information. There should also be a paragraph that details what happens in case of a default and which state's laws prevail (by the way, sometimes they put this in and it doesn't apply but you have to start with what is actually written in the contract).