topic Re: Is 2.29% really 2.29% in Auto Loans

Is 2.29% really 2.29%

Jb11 — Wed, 27 Mar 2013 18:29:18 GMT

Hi all,

I just purchased a new car and received a 2.29% interest rate from the bank. My question, does the 2.29% really equate to that?

Loan Amt: 45573.76

Interest Rate: 2.29%

Terms 60 months

Bank says my pmt will be $805.35

My number crunching came up with $804.60 why is there a diifetrence? Anyone know ?

I used Excel to get my monthly payment of $804.60. The banks number is $805.35 which equates to around 2.33%

Re: Is 2.29% really 2.29%

Anonymous — Wed, 27 Mar 2013 18:39:48 GMT

Are you compounding interest monthly or yearly, my guess is yearly

Re: Is 2.29% really 2.29%

Jb11 — Wed, 27 Mar 2013 18:43:50 GMT

Correct Yearly

Re: Is 2.29% really 2.29%

Anonymous — Wed, 27 Mar 2013 18:53:15 GMT

Ok im wayyy too lazy to break out the calculator but calculating it yearly will not accurately break down your interest paid. On a month to month basis if interest is charged at the yearly rate divided by the number of months charge that amount will be greater than the sum of the payments for the year times the interest for the entire yea.....i think. LOL

So basically because you make monthly payments instead of one BIG payment yearly you end up paying a fraction more in interest.

Re: Is 2.29% really 2.29%

Anonymous — Wed, 27 Mar 2013 18:55:51 GMT

The 2.29 is the APR, APY which accounts for the amount of time interest is applied is more.

Look up APY vs APR in google for a much better explaination than I can give

Re: Is 2.29% really 2.29%

Jb11 — Wed, 27 Mar 2013 19:03:16 GMT

It's definitely an APR of 2.29%. I've used every calculator tool for auto loans I could find and they all say 804.60 I used the banks calculator and it came out to 805 they don't show cents. So I called the bank and the loan officer could only say that monthly is $805.35 an my APR was 2.29%. She couldn't tell me how they got that number. I said that's a rate closer to 2.33%. She had no answers. This seems a bit strange to me. What can I do now?

Re: Is 2.29% really 2.29%

Anonymous — Wed, 27 Mar 2013 19:12:30 GMT

Ok let me try again.

Yes the 2.29 is the APR. APR means that the standard yearly rate if you were to make ONE yearly payment you would pay 2.29% in interest. You pay monthly, not yearly. Therefore the APY (the real interest rate for your loan) is HIGHER.

Re: Is 2.29% really 2.29%

Jb11 — Wed, 27 Mar 2013 19:23:59 GMT

I understand better. Thanks for clearing that up. I'm reading more abotu it now. Thank you

Re: Is 2.29% really 2.29%

Anonymous — Wed, 27 Mar 2013 19:24:42 GMT

No problem man, congratz on getting 2.29% !!!

Re: Is 2.29% really 2.29%

Anonymous — Wed, 27 Mar 2013 21:07:33 GMT

I am getting the same 804.60 as you. Seems like your bank is milking an extra $1 out of you and hoping you won't notice.

If you make even $1000 payments. You will pay off your loan 1 year sooner and save about $550 in interest.

Re: Is 2.29% really 2.29%

Anonymous — Wed, 27 Mar 2013 21:19:56 GMT

Ok I just did the math and it should be $804.60. Perhaps the first number they gave you was a rounded figure (rounded up from 804.6 to 805) but I have no clue where they got the 805.35. Sorry for all the confusion!!!

Re: Is 2.29% really 2.29%

Jb11 — Wed, 27 Mar 2013 22:52:39 GMT

So if I am understanding this correctly they ARE charging me higher monthly than they should? What Can I do? I tried to talk with the bank but they are saying that's the monthly figure $805.35.

Re: Is 2.29% really 2.29%

Anonymous — Wed, 27 Mar 2013 22:56:34 GMT

@Jb11 wrote:
So if I am understanding this correctly they ARE charging me higher monthly than they should? What Can I do? I tried to talk with the bank but they are saying that's the monthly figure $805.35.

You should be paying more than the minimum anyways. I wouldn't worry about the $1.

Re: Is 2.29% really 2.29%

Anonymous — Thu, 28 Mar 2013 15:10:26 GMT

I personally wouldnt go through the hassle of arguing a difference of less than 1$, but that is totally up to you. I believe the difference is probably caused to some difference in the loan amount, possibly some hidden fee from the dealer or random finance charge rolled into the loan....who knows.

Re: Is 2.29% really 2.29%

Jb11 — Thu, 28 Mar 2013 16:26:47 GMT

Yes, I agree it isn't worth the hassle. I am going to pay more than the min anyways. I just don't like the idea of thinking maybe the bank or the dealership is doing one over on me or any other consumer. Thanks all for your input and time.

Re: Is 2.29% really 2.29%

oscar_actuary — Fri, 29 Mar 2013 19:30:12 GMT

possibly, time from closing to first payment, interest accrued to make the loan amount actually higher.

math is sorta my thing

Re: Is 2.29% really 2.29%

L0RDAVENTAD0R — Tue, 02 Apr 2013 05:08:33 GMT

The loan officer couldn't tell you why ? Interesting. Does sound like the bank is trying to pull a fast one on you with a some hidden fee somewhere & knows you won't do anything over a dollar. I would though if I was bored enough.

Re: Is 2.29% really 2.29%

Anonymous — Tue, 02 Apr 2013 20:10:17 GMT

@oscar_actuary wrote:
possibly, time from closing to first payment, interest accrued to make the loan amount actually higher.

math is sorta my thing

I am thinking something along those lines as well. You are accruing about $3 per day of interest at the start, so if your first statement cuts about 20 days after close. You would end up with a monthly payment about $1 higher than simple calculations would yield.

Re: Is 2.29% really 2.29%

awal — Tue, 02 Apr 2013 15:49:29 GMT

@Anonymous wrote:
@oscar_actuary wrote:
possibly, time from closing to first payment, interest accrued to make the loan amount actually higher.

math is sorta my thing
+1

I am thinking something along those lines as well. You are accruing about $3 per day of interest at the start, so if your first payment is about 20 days after close. You would end up with a monthly payment about $1 higher than simple calculations would yield.

That seems like the most logical thing to me. My last auto loan had a "grace" period of about 45 days, during that time I couldn't make a payment and interest was still accruing.

Re: Is 2.29% really 2.29%

Anonymous — Tue, 02 Apr 2013 20:11:14 GMT

@awal wrote:
@Anonymous wrote:
@oscar_actuary wrote:
possibly, time from closing to first payment, interest accrued to make the loan amount actually higher.

math is sorta my thing
+1

I am thinking something along those lines as well. You are accruing about $3 per day of interest at the start, so if your first payment is about 20 days after close. You would end up with a monthly payment about $1 higher than simple calculations would yield.
That seems like the most logical thing to me. My last auto loan had a "grace" period of about 45 days, during that time I couldn't make a payment and interest was still accruing.

Not much of a grace period...lol