Overhaulin'

How do they calculate the interest % rate on a car loan?

So I just got a new used car last month and I just made my first payment a couple days ago, and I think their calculations are wrong according to what my contract states. I borrowed $15,999.01 from the bank @ 12.75% interest rate for 72 months. The contract states I will have paid a total of $7,095.60 in interest within that 72 month period, which totals to $23,094.61 I would have paid. Now question is, I was just looking at the payoff amount of my loan which is now $15,871.37!?!?! I already extimated this according to the contract, and I should be paying $3.24 a day. My contract started 3/12/2010, and the due date is 4/26/10 that is 45 days @ 3.24 a day = $145.80 (interest) I made a payment of $340.00 so $194.20 should have went towards the principle balance, which should make my pay off amount to $15,804.81. I am not sure how they go by grace periods. But if they were calculating it by $3.24 a day that would make it almost a 65 grace period. SO according to their calculations it's $5.54 a day. I paid $212.36 in interest out of the $340 I paid them. Which totals to $12,132.60 total interest paid in 72 months. Which adds up to $28,131.61 I would have paid for the car after 6 years. Please someone help me, how they calculated it like that? Am I right should I scream at the bank WTF???

Public Comments

1. you have it all wrong. That is the per diem for being late on payments. The front end of all installment contracts is mostly interest, You gain every month on the principal amount till the last payment is almost all principal