Overhaulin'

Where is my monthly payment being calculated from?! APR on car Loan?

Hello. Just bought a new car today (Ford for those that are wondering). Yippie! I bought it for $27k out the door with $5k down. The APR on the car is 2.9% for 48 months. Financed: $22,000 APR: 2.9% Period: 48 months So I'm just running the math now to see how all this was calculated (I like to test my brain mathematically). What I don't understand right now is part of the "Federal Truth In Lending Disclosure" box on my invoice receipt. It says that the "Finance Charge (The dollar amount the credit will cost you)" is $1,351.52 It also lists that my monthly payments will be $486.49. How did they come up with this number. Shouldn't it be $22000/48 x 1.029 = monthly payment? Its not a question of affordability (well below what I was expecting to pay), I just don't understand how $1,351.52 comes out from 2.9% of $22,000. If anyone could shed some light on this, that would be great!!

Public Comments

1. The interest is calculated on the outstanding balance (which will decrease every month). (0.029/12)*22000 = $53.17 interest for the first month and $432.82 principal. (0.029/12)*(22000 - 432.82) = $52.12 interest for the second month and $433.86 principal. etc.