frank69m

I financed about 20,000 with Honda Financial Services for my TL with the 2.9% rate...

Out of that, I believe about 850 was interest.

They are suppose to use Simple Interest....so...

Principal+Interest=20,000 / 36 months = 555.56 my monthly payment...

follow me so far...easy, eh...

Now the question...Like my house, is most of the interest stacked at the beginning of my car loan. I was led to believe not. Meaning, I checked my recent bill, and saw that the interest i was paying was

like 60 bucks...I thought with simple interest, it is spread evenly...

850 interest / 36 = 23.61 interest a month....so why the 60 interest breakdown?


Is this right....I was lead to believe by the finance guy that this is it....

Thanks and sorry for the OTT question...really interesting in knowning if HFS is ripping me......I wanted to pay it off in like 1 year and a half, but why should i if the interest is stacked in the early stages of the loan.

aaron

sorry this is going to be a long reply but the short answer is you got what you wanted and will save money if you pay off early.


"They are suppose to use Simple Interest....so..."

mortgages and car loans are known as "fee simple" in the industry which may have been the miscommunication between you and the sales guy

"Principal+Interest=20,000 / 36 months = 555.56 my monthly payment..."

just checking the math and 20k 36 months at exactly 2.9 = 580.74 if all things are correct than the loan amount should be 19132.75. Taking that math if you take 555.56 X 36 = 20000.16 total interes paid 20000.16-19132.75 =867.41.

850 interest / 36 = 23.61 interest a month....so why the 60 interest breakdown?

as stated earlier all car loans that i know of and definitly all mortgages are calculated this way, never seen a loan offered by a bank that the interest is the same every single month. and just to be very clear, interest accrues daily not monthly, if you make a payment, then make a payment in two days all but 2 days worth of interest will go to principal. Hence, every day you pay in a given month or for the payoff in totaly you will save money. This will apply to mortgages but on a much greater scale, because this loan for your car costs you 850 in interest if you decide to keep the loan to term. A mortgage on the other hand will cost up to or more than the amount borrowed depending on your interest rate. Ie a 110,000 loan at 6% over 30 years will have 127,423 in additional interest and just by paying 30 days early every month you can save approx 55,000 and with the money you saved by almost 2 tl's free, haha. anyways i am a mortgage broker so this is my life, calculating this fun numbers stuff and finding ways to save money.