Hey guys,

I am in the market for a wrx but wanted some clarification or an explanation to the APR % that is tacked on to car loans. How do you derive how much you actually will be paying in interest for the alloted time period that you have the loan for?

Is the % added on to your "loan" balance after a month or after a year. I just want to figure out whether i should go 48 month or 60 month, because i heard the longer you drag out the loan period, the more money actually you are paying in interest depending on your apr. So a $20000 car purchased with a car loan after 5 or 6 years could actually cost you $28k to $30k because of the interest. Any help would be much appreciated Thanks.

- Daniel

 

I believe that the interest is generally compounded daily. I don't remember the exact calculations for this.

But if you have a loan for 5 years at the same APR as 4 years you will pay a bit more money. I wouldn't worry myself over it too much though.

 

apr/12 =r

plug that r into

actual interest rate = 1 - (1+r)^t

where t is the number of months, and it will give you an actual interest rate

<-chem e

 

When it comes to financing, the shorter the period you are financing a car, the less interest you have to pay. You'll end up paying more interest if you finance your car 60 months compared to 48. If you have MS Excel, there is an ammortization function available for you to calculate the interest you'll end up paying depending on the APR% and term of the loan.

-Soren

 

thanks guys for the info

- daniel