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Fund charges on some used car loan include all costs to the borrower to receive the loan. Such costs may include interest expenses (either prepaid or distribute around the existence of the loan), lender origination charges or some additional finance-related fees an automobile lender may tack on to a potential car loan. The only difference between a used car loan and a new car loan is that is the curiosity rate remains typically much higher.

Trouble: Moderately Simple

Instructions

1 Understand the idea of compound interest, which all car loans operate (whereas opposed to effortless interest). The lender calculates interest monthly on the outstanding amount borrowed (principal), not once a year; for that reason, the APR (annual percentage rate) is a bit higher besides the stated yearly interest rate. For example, some loan advertised to have a 2.08 percent interest rate actually has an APR of 2.10% due to the effects regarding monthly compounding.

2 Calculate the monthly payment on the car loan. Using any monetary calculator (available online) or Excel, input the curiosity rate you expect split through 12 (for monthly payments), the total quantity about payments to be made and the price regarding the car. For instance, from Excel you would type =PMT(.05/12, 48, -20000). This would calculate the payment of a $20,000 automobile at 5 percent attention for 4 long time (48 months). You show the $20,000 amount as a adverse since it is funds you owe. The monthly payment in this problem comes to $460.59.

3 Multiply the complete number of payments you owe by the monthly payment sum. With the above example, multiplying $460.59 times 48 equals $22,108.32. Subtract the period you borrowed from this number to locate out the total curiosity you paid ($22,108.32 minus $20,000 equals $2,108.32).

4 Add the whole amount about interest you paid to any other origination fees the lender charged you to obtain the automobile loan. These pair amounts represent the whole finance cost for the automobile loan.

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