My husband got his car last year from bell honda... it was a 2007 honda accord exl...?

Question

i just saw his paperwork and here is what it said...

selling price 25887.00

down 5000

APR 8.49

Finance charge 7955.12

amount financed 28019.68

total payments 35974.80

total sale price 40974.80

does this seem exorbitant to you?

and i dont understand what consists of the finance charge... is it really just a finance charge or does it sum up to the 72 months interest and etc or what bec. it doesn't add up... when you come to think of it, he will almost have to pay double the value of the car... i don't know if this is just natural or what... and if we refinance, what happens to this finance charge? help pls. thnx!

Answer 1

Something is still fishy, but let me explain at least some of it.

Car Price: 25887

Down payment: 5000

Total: 20887

PLUS Tax, Title and Fees (this is the one I can't figure out)

Total Amount Financed = 20887+Tax Title Fees = 28019.68

APR (rate of interest) = 8.49%

After you paid all your payments with interest you will have paid 35974.80, which is the Total Amt Financed (28019.68) PLUS the finance changes, aka interest (7955.12)

That 35974.80 and the INITIAL 5K you put down add up to the TOTAL COST of the car in the end. They were being nice by showing all of this to you. This is what happens when you finance a car. You end up paying so much more than its worth because you don't HAVE 25K to drop right now.

Now, with all that said, the only worry I have here is the tax, title and license being $7,132.68. I'd need to know what else you bought with the car (extended warranties, GAP, etc) and the state title, license and taxes.

If you refinance, whatever of the interest (part of the 7995.12) you have already paid stays with the current lender. But that isn't added into the new loan. The new loan you get when refinancing is based on your Amount financed that is left after the principal you've already paid.

Answer 2

Something's wrong with the math.  The finance charge is the total interest you'll pay over the length of the loan.  The 5000 down payment should've been subtracted from the selling price, making the total amount financed 20,887.  Or....did he trade in another vehicle as well?  If he was upside-down on a previous loan, they would roll over the deficiency into the new loan.  But, if it's just a straight sale, someone's made a mistake, and you need to get the loan company to straighten it out.  

Example:

Purchase price:  25,887

Down payment:  5,000

Amount financed:  20,887

APR:  8.49

Total finance charge:  10,639.84   (20,887 X .0849 X 6 <years>)

Total payments:  31,526.84  (20,887 + 10,639.84)

Monthly payment:  437.87   (31,526.84 / 72 <months>)

Answer 3

Depends on your interest rate and length of loan.  If you have bad credit and a 5 - 7 year loan, its probably correct.

Answer 4

The longer you finance, the more the interest is.  And you have a 6 year loan at 8 and a half percent.  Which means what, over that time period, 51% of the price, or as you put it almost double.  If you refinance for an even longer period, it gets worse.

He did pay almost 20% down, but that is a long term to finance for.

It's even worse when you buy a house.  And you're looking at 30 years.  When I made my last house payment, only $245.66 actually went against the principle amount.  And that's at 6%.

Answer 5

The finance charge they put on the finance contract should have been the total interest he would have paid after 72 months.  I'm not sure how the heck they it got shot up to 40K, that sounds ridiculous!