Calling all Finance Majors

dannyballs

dannyballs

Well-known member
Sep 26, 2008
332
0
Chicago
So I went to buy an LR4 yesterday and got hung up in the finanace mgr's office. His monthly payment was around $30 per month higher than what I had calculated. I was using a traditional car finance formula:

(Amount financed * (Interest rate / 12)) / (1 -(1+ Interest rate/12)^-number of monthly payments)

Don't know if I should run from the dealer or if there is another formula in place today?
 
thospb

thospb

Active member
Dec 8, 2010
35
0
Placerville CA
I would read over very closely the document in case they have something in there you had not figured on; insurance, extended warranty, etc. Also, did you use a payment program or did you do the math yourself? If you use a program there is much less room for error.
 
dannyballs

dannyballs

Well-known member
Sep 26, 2008
332
0
Chicago
Used the formula above. I think the finance mgr was whacked out.... Need to know if there are other methods in place to calculate car loans.
 
Two Cold Soakers

Two Cold Soakers

Well-known member
Apr 24, 2007
1,450
0
49
At your mom's
d1driver said:
Ask him exactly how he calculated it. If he cannot show you, run.
Click to expand...
This.

Lessons in financial computations should not be learned from the finance manager of an auto dealership.
(hence the question, no doubt)

Your formula is correct.
Ask him where his formula deviates from the norm.
Have him write it out, longhand, so an eight year old can understand. Take it home and sleep on it.

Furthermore, tell him to back your answer out of his formula, and use that as the sales price.

Tell him to kiss your ass and walk out a few times.
Try to piss him off. Accuse him of lying to you.
Make him jump through financial hoops to sell you the car.

Tell him (IN THE MIDDLE OF NEGOTIATIONS) that you need to make a phone call. Leave the closing room, chat up the receptionist, piss on the floor next to the urinal, go back and tell him the deal is off unless he can drop the price.

YOU are in charge here. Remember that.
 
M

MarkP

Well-known member
Apr 23, 2004
6,672
0
Colorado
Create a theoretical loan of say $20K. Both of you calculate the monthly payment using their own method.

1) Answers are the same - review your contract, identify the difference, agree on the final price.

2) Answers are different - provide your formula, tell the finance manager that it is his/her job to figure out the difference and call you when they have a detailed explanation. Walk out and say "Hope to hear from you soon".
 
kennith

kennith

Well-known member
Apr 22, 2004
10,891
172
North Carolina
You don't know if you don't ask.

Directly compare your methods to find the difference. You won't waste anyone's time by sitting down with the guy. He wants you to be happy. He has a tough job, and he is definitely out to get money from you, but his game is the end result of all that financing.

That's why most of the time the negotiations revolve around getting the monthly payments where you want them.

They need to make money, so the idea of walking in and stiffing the dealer on the sticker price was created. I love it when people walk out thinking they screwed the dealer.

It's hard to make money selling cars. That's why they like trade-ins. That's their own little game that they can control. Service helps as well, but the actual new car is often not worth much to them without financing.

Don't hate. :) They need those sharks, otherwise, it wouldn't be worth having a dealership. The last place they want you to feel stiffed is on those payments. Odds are, you either got something wrong or just don't understand something. He could have made a mistake as well, or there could have been a lack of communication.

Compare notes. The guy just wants to sell a car, and he wants you to walk out with a smile on your face, even if he is forced to look at you as a target. After all, that's how you look at him.

Cheers,

Kennith
 
disco_fever

disco_fever

Well-known member
May 11, 2004
537
0
37
Morristown/Richmond/Sydney
Without having the numbers it front of me in might have to do with variations with http://en.wikipedia.org/wiki/Annual_percentage_rate .

Also, I highly doubt the 'finance' manager is doing the calculation by hand. LNRA wouldn't want to risk an error because face it, the guy didn't choose that job over one at Goldman.

They should be able to hand you something official that describes how they do it and an explanation of your specific terms/calculations. If not, walk.
 
KyleT

KyleT

Well-known member
Mar 28, 2007
6,059
8
39
Fort Worth, TEXAS
if you really want to piss them off, go in, get a loan, then pay it off (or use your own bank loan) before 3-4 mos, they will usually make a better deal to finance because they get FI money back.
 
dannyballs

dannyballs

Well-known member
Sep 26, 2008
332
0
Chicago
Here are the numbers:
$43,477 Financed
60 mo term
3.9% interest

Guido came back at $832 per month. That means he was financing $45,287 @ 3.9% or $43,477 @ 5.575%.

My real question is are there other ways to determine compounded interest outside of the traditional formula used above?
 
Ballah06

Ballah06

Well-known member
Jan 21, 2007
5,638
16
Savannah, GA
dannyballs said:
Here are the numbers:
$43,477 Financed
60 mo term
3.9% interest

Guido came back at $832 per month. That means he was financing $45,287 @ 3.9% or $43,477 @ 5.575%.

My real question is are there other ways to determine compounded interest outside of the traditional formula used above?
Click to expand...

The finance person should provide you the exact interest rate they are charging you. As others have also mentioned, explore financing with other banks, especially one you bank with. I was able to go back and forth with the dealer and his bank because my own bank offered a very low rate. They wanted to finance a used vehicle, so they went even lower (1.9% on a used vehicle).

P.S. I always try to get pre-approved for a loan from my own bank, that way I know exactly how much I am going to spend up to (approved amount) and what the interest is. From then on, it is simply negotiating the price of the vehicle as low as you can.
 
Rugbier

Rugbier

Well-known member
Jun 17, 2008
2,220
0
People's Republic of Marylandistan
Look at the contract should clearly state amount financed , rate and terms.

Watch for when the first payment is due. So you are not adding the first installment as a financed amount.

I am sure you both have different 1st installment and on 45k will be substacial
 
adriatic04

adriatic04

Well-known member
Mar 22, 2007
2,506
2
cleveland, oh
sure he wasnt putting tax, tag, and title figure or some other bullshit amount on the sell price to come up with a higher finance amount.

they love financing fees, boosts their interest portion on the loan.

or loan start date is later than what you are calculating, they are riding you for 30 days or something ontop of original loan amount.
 
dcarr1971

dcarr1971

Well-known member
Jun 16, 2010
610
0
Pittsburgh, PA USA
dannyballs said:
...My real question is are there other ways to determine compounded interest outside of the traditional formula used above?
Click to expand...

Yes, but the type of loan and interest accrual method must be disclosed on the contract. As others have said, you need to demand a detailed explanation...
 
Two Cold Soakers

Two Cold Soakers

Well-known member
Apr 24, 2007
1,450
0
49
At your mom's
group captain mandrake said:
Why not get financing through your own bank?
Agree to a purchase price on the truck, go to the bank, and come back to the dealer with a bank check. Screw the dealer finance dept.
Click to expand...

All hail the magic conch!!!!!

It speaks volumes of truth.
 
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