Questions about financing a car and interest rates... NT please help.

3,766
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Joined Jan 1, 2009
So here's the situation...

Last weekend I was out looking for a new/used car... I ended up finding a car with the sticker price of $12,500. I really liked the car so I started the process of getting financed  and here's the payment plan they were trying to put me on.
$4,500 down and $300/month for 60 months which ends up being  $22,500.  Being that my credit isn't good they told me I was being financed @ 25%. But after hearing that total amount I chuckled and walked away with the ill stone face. 

So my question is this... Am I getting took here or is this really how banks get down?
I thought that if I was getting financed for a car @ 25% it would only be 25% more of total cost... Example $10,000 + 25% interest = $12,500(isn't that what it should be or is there another formula banks work off)
For the record they never said anything about annual interest rate, just that I was being financed at 25%.

Any help would be appreciated... Thanks NT. 

   
 

baltimore

Banned
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Joined Apr 5, 2010
Im not sure i have good credit. Oh do you know your gonna have to pay insurance also? They seem to be trying to sucker you.
 
12,083
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Joined Feb 12, 2003
When you say you were going through the process of being financed, did you mean through the Car place or privately (ie - Bank / Credit Union)?

Did you run your own credit prior to this?

Exuberant interest rates aren't uncommon, per se, for those with "bad" credit.
 
3,766
382
Joined Jan 1, 2009
Originally Posted by LazyJ10

When you say you were going through the process of being processed, did you mean through the Car place or privately (ie - Bank / Credit Union)?

Did you run your own credit prior to this?

Exuberant interest rates aren't uncommon, per se, for those with "bad" credit.
Yeah it was through the dealership directly... The thing is I could damn near pay the car in cash. I just wanted to try and start establishing credit.
Either way it still seemed like a stupid high amount... They told me 25% but if you do the math yourself it looks more along the lines of 90%.  
 
20,655
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Joined Apr 15, 2007
http://www.bankrate.com/c...uto-loan-calculator.aspx

Try an auto loan calculator. Easy to find on the internet. When i put in the 4500 down meaning your financing 8k at 25% for 60 months it says your payment should only be about 235.

Your interest rate is compounded differently. I am assuming its yearly. So you pay 25% yearly on the outstanding amount of the loan. You would divide the 25% by 12 and put that much interenst on the monthly principle amount. There are tables that stretch it out for the life of the loan. But the calculator does it all for you.
 
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Joined Jan 1, 2009
Originally Posted by Jking0821

http://www.bankrate.com/c...uto-loan-calculator.aspx

Try an auto loan calculator. Easy to find on the internet. When i put in the 4500 down meaning your financing 8k at 25% for 60 months it says your payment should only be about 235.

Your interest rate is compounded differently. I am assuming its yearly. So you pay 25% yearly on the outstanding amount of the loan. You would divide the 25% by 12 and put that much interenst on the monthly principle amount. There are tables that stretch it out for the life of the loan. But the calculator does it all for you.
Thanks for that bit of info... Yeah it looks like the loan might be 25% interest yearly, which if that's the case is stupid high.
I really wanted to start establishing credit but not at that rate... Other NTers in the market for a car be sure to do the research before you sign any paperwork cause dealerships will always try and get over.
 
20,655
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Joined Apr 15, 2007
I just recently bought a car 2009 Toyota corolla S. paid 15200 cash. I've been saving since i was 16 (22 now) drove beaters til i could get the paper up. But i live very old school in the sense of why pay more? I personally hate bills looming over my head. So just pay cash and don't worry about it ever again. Car companies make tons of money through financing. Also its cheaper on your car insurance if you don't have a lean on the car too.

Buying a car is the most ******ed thing ever. I went to the dealership picked out my car. Called said im coming to get it. Had a check written for 15.2 in my pocket said ok here you go. Give me my car. 3 hours later....i got my car.

After 100 different add ons and sales pitches.
 
12,083
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Joined Feb 12, 2003
I'd say go through your bank or begin a relationship with a credit union.

Financing a car to begin credit isn't a good idea because I feel the car will depreciate faster and you're end cost is going to be high (especially with a high interest rate).

Offer to bring a higher down payment if you think they're playing you. Collateral and money speak volumes.
 
942
14
Joined Aug 7, 2006
25% interest...annually?


that is really really high, good move walking out...you don't want to pay that much, especially on a depreciating asset. if you 'almost' have enough to buy it in cash then save a little more and pay for it outright, then start bringing up your credit score by responsibly using credit cards. i'd imagine that if you regularly use credit cards and pay them off on time over a 60 month period (the projected time of your auto loan) your credit score should increase substantially.

may i ask what you did to ruin your credit score?

-waystinthyme
 
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Joined Jan 1, 2009
Originally Posted by waystinthyme

25% interest...annually?


that is really really high, good move walking out...you don't want to pay that much, especially on a depreciating asset. if you 'almost' have enough to buy it in cash then save a little more and pay for it outright, then start bringing up your credit score by responsibly using credit cards. i'd imagine that if you regularly use credit cards and pay them off on time over a 60 month period (the projected time of your auto loan) your credit score should increase substantially.

may i ask what you did to ruin your credit score?

-waystinthyme
Yeah I hear you... I def. wasn't gonna sign for that @%+@.
My credit isn't bad per se... It's just that I never did anything to establish credit. No cellphone bills no creditcards. nada. Oh but I do have student loans that I owe that I defaulted on a couple times but thats pretty much it.    
 
942
14
Joined Aug 7, 2006
Originally Posted by 430AM

Originally Posted by waystinthyme

25% interest...annually?


that is really really high, good move walking out...you don't want to pay that much, especially on a depreciating asset. if you 'almost' have enough to buy it in cash then save a little more and pay for it outright, then start bringing up your credit score by responsibly using credit cards. i'd imagine that if you regularly use credit cards and pay them off on time over a 60 month period (the projected time of your auto loan) your credit score should increase substantially.

may i ask what you did to ruin your credit score?

-waystinthyme
Yeah I hear you... I def. wasn't gonna sign for that @%+@.
My credit isn't bad per se... It's just that I never did anything to establish credit. No cellphone bills no creditcards. nada. Oh but I do have student loans that I owe that I defaulted on a couple times but thats pretty much it.    
oh ok, i see. i would suggest going to your bank and applying for a student credit card...even if you're not in school, that is usually what they give to people who don't have any credit. once you get your card, begin using it and paying off the bill monthly...you should be able to track your purchases online. after about a year of regular payments, your score should increase substantially. not sure how badly you need a car, but if you need it immediately consider getting a parent or close friend with good credit to co-sign for you.

-waystinthyme
  
 
3,766
382
Joined Jan 1, 2009
Originally Posted by waystinthyme

Originally Posted by 430AM

Originally Posted by waystinthyme

25% interest...annually?


that is really really high, good move walking out...you don't want to pay that much, especially on a depreciating asset. if you 'almost' have enough to buy it in cash then save a little more and pay for it outright, then start bringing up your credit score by responsibly using credit cards. i'd imagine that if you regularly use credit cards and pay them off on time over a 60 month period (the projected time of your auto loan) your credit score should increase substantially.

may i ask what you did to ruin your credit score?

-waystinthyme
Yeah I hear you... I def. wasn't gonna sign for that @%+@.
My credit isn't bad per se... It's just that I never did anything to establish credit. No cellphone bills no creditcards. nada. Oh but I do have student loans that I owe that I defaulted on a couple times but thats pretty much it.    
oh ok, i see. i would suggest going to your bank and applying for a student credit card...even if you're not in school, that is usually what they give to people who don't have any credit. once you get your card, begin using it and paying off the bill monthly...you should be able to track your purchases online. after about a year of regular payments, your score should increase substantially. not sure how badly you need a car, but if you need it immediately consider getting a parent or close friend with good credit to co-sign for you.

-waystinthyme
  
Thanks waystinthhyme and the rest of NT for your input thus far... It's all very very helpful. 
 
12,083
1,114
Joined Feb 12, 2003
Seriously, run your credit report and score.

The word "default" in any sense, isn't going to be good for you.
 
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