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Loan Question, interest rate

J

Joony

Diamond Member
Greetings all,

So I'm finally going to get my first car, and I'll be taking advantage of the USAA Career Starter (Commissioning) 2% 25k loan on a loaded Mazda3 Grand Touring 🙂

(and of course there will be money left over to save up)

Anyhow, I finally got the loan docs to sign with all the numbers.

APR 1.9914%
Finance Charge $1928.59
Amount Financed $25,000
Total Payments $26928.59
Monthly Payments $448.81
scan of the loan doc w/ numbers

edit: Whoops, 5 years, 60 months.

So I ran the numbers through some basic interest rate calculators online, and the actual rate seems to be more like 2.962%.

I don't remember much from the finance class I took a while back, so maybe I'm just going crazy.

So, am I paranoid or are the numbers actually right?
 
How many months?

Edit: for 60 months, I found that 2.962 matched those numbers almost exactly.
 
Whoops, the Mazda3 is a Grand Touring w/ Sunroof.

Should be about 22k OTD. With 3k left for me to invest or so.
 
25K on a 3? is that a speed3? If not, then did you put a kitchen sink in it?

Anyways, did you add tax, title, and any other fee? ANyways, that matched Edmunds calculations (the 2%).
 
Originally posted by: Gibson486
Originally posted by: krunchykrome
Originally posted by: Joony
Whoops, the Mazda3 is a Grand Touring w/ Sunroof.

Should be about 22k OTD. With 3k left for me to invest or so.
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lol, ok, that sounds better
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except he is gonna take out more loan to invest....
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At 1.99%... (or so they said)
 
Originally posted by: txrandom
Originally posted by: Chiropteran
Interest rate lower than the rate of inflation, how do the banks do it?
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Rip him off and actually charge him a different interest rate?
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Well yeah that whole thing is fishy and I'd get it figured out before taking the loan, but even at 3% it's below inflation.
 
Originally posted by: txrandom
The monthly payment is messed up. It should be $10 lower per month.
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Yeah! But maybe they're calculating it differently? Is there some step that I'm not seeing?

I don't see any reason why they would rip me off, they're highly regarded in the military banking community.
 
Originally posted by: Joony
Originally posted by: txrandom
The monthly payment is messed up. It should be $10 lower per month.
Click to expand...

Yeah! But maybe they're calculating it differently? Is there some step that I'm not seeing?

I don't see any reason why they would rip me off, they're highly regarded in the military banking community.
Click to expand...

I believe the only thing that may factor into calculating the interest wrong is using APR vs the actual interest rate, but that is super small.

APR = (1 + I/t)^t where I is the interest rate and t is the compounding time period like daily, monthly, etc.
 
Most loan calculators assume monthly compounding and monthly payments. This loan is daily compounding and monthly payments. Thus, most online calculators will fail.

I did a rough calcuation (it is complicated due to Feburary being only 28 days except for leap year, so it depends on which day you fill out the form), a payment of $440 every month at 0.02%/365 compounded daily will pay it off in 5 years.

In this case, compounding daily vs monthly adds about the same as if the interest rate was 1% higher.
 
Originally posted by: dullard
Most loan calculators assume monthly compounding and monthly payments. This loan is daily compounding and monthly payments. Thus, most online calculators will fail.

I did a rough calcuation (it is complicated due to Feburary being only 28 days except for leap year, so it depends on which day you fill out the form), a payment of $440 every month at 0.02%/365 compounded daily will pay it off in 5 years.

In this case, compounding daily vs monthly adds about the same as if the interest rate was 1% higher.
Click to expand...

How did you know it compounded daily? Was it just a matter of guess/check?

Also, a loan that compounds daily behaves like a savings account, correct? If so, wouldn't there be some easy formula to use to figure out the true interest rate, just as savings accounts use the concepts of APR and APY?

I ask because after reading your post, I suspect my car loan could be compounding daily as well, because when I plugged in the info into a standard payment calculator, I did not get the same numbers the financing bank has.
 
So I called them up and they said it was because it was 'simple day interest' which sounds almost like daily compounding.

Also, somehow the fact that I got it earlier relative to when they start sending bills somehow affects it.

After comparing it with some buddies who also got the same loan, the monthly payments are about right.
 
Originally posted by: Special K
Originally posted by: dullard
Most loan calculators assume monthly compounding and monthly payments. This loan is daily compounding and monthly payments. Thus, most online calculators will fail.

I did a rough calcuation (it is complicated due to Feburary being only 28 days except for leap year, so it depends on which day you fill out the form), a payment of $440 every month at 0.02%/365 compounded daily will pay it off in 5 years.

In this case, compounding daily vs monthly adds about the same as if the interest rate was 1% higher.
Click to expand...

How did you know it compounded daily? Was it just a matter of guess/check?

Also, a loan that compounds daily behaves like a savings account, correct? If so, wouldn't there be some easy formula to use to figure out the true interest rate, just as savings accounts use the concepts of APR and APY?

I ask because after reading your post, I suspect my car loan could be compounding daily as well, because when I plugged in the info into a standard payment calculator, I did not get the same numbers the financing bank has.
Click to expand...

Just about all loans, credit cards, etc. compound on a daily basis. Every little bit counts if you're a bank.
 
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