Auto Loans Auto loan doesn't add up!!!

[PLATINUMENIGMA]

I purchased a car on Friday... upon reviewing my contract my husband found a descrepency between the interest rate (24%) and the amount they filled in for finance charges ($11,000) the price of the car was $16,000... these numbers are rounded off but how is this possible. Could it be legal? HELP!?! We are in Texas and the car is used.

 

[bagelwoof]

IANAL (I am not a lawyer) but...

Typically, with any debt, you borrow a principal amount and then the lender charges you amortized compounded interest figured for the life of the loan. This is where they make their money. And they make a lot of it. Especially at 24%.

Most people don't look at the final value of the loans they are taking out, and many lenders take great pains to lull a borrower into a complacent sense great value by obfuscating the final value of the loan contract. It's there in black and white, but they surely don't want you thinking about it. Many people would drive a beat up old jalopy and live in a tar paper shack if they really thought about what they pay for debt service. For example, a $250K mortgage taken out for 30 years has a final value of $630K; so the mortgagee pays $380K in interest for that loan. If you're paying off that car loan over 5 years, you'll pay approximately $11K in interest, and your payments will be about $460/month.

I would still look carefully at the specific terms they use and google words that don't appear to jive with the meanings you believe. Often those are terms of specific parlance and they don't mean what the average person uses them for.

As to the $11K interest: Shocking isn't it? You'll pay almost as much to service the loan as you did for the car.