Ok so here goes... I was approved for a loan in the amount of 24,617 through the dealers bank (RBS Citizens) for a fixed rate of 2.72% over 60 months. According to this I should have a payment of $439/month, paying a total interest of $1,740 over the life of the loan. (this equals out to $29 per month in interest). However, I got my second statement in the mail today, and about had a heart attack.. There was a 82$ interest charge on there! I called them ASAP and asked what is going on, and heres what they said:
They said that the interest accumulates DAILY, and the amount of the interest that accumulates daily is based upon the amount of the principal. (Is this how most auto loans work?) This is the formula they use to calculate the daily interest. Principal (23,975) x rate (.0272) = 652. Divide 652 by 365 = daily interest. Was i screwed over at the dealer??? Is this the normal way of financing?? This period it was 82$ because it was over 30 days from when I actually bought the truck to when they recieved the first payment. But according to that formula they use, until i pay the principal down, my next payment at 30 days will still have over 50$ going to pure interest!! I'm so confused, but heres the real question, if I pay only the minimum every month (which I wont), will I still only pay $1740 in interest over the life of the loan according to their method? Or am I getting majorly screwed? Any help is appreciated!!! Thanks everyone.
