Car financing question

[UtterNutter]

It won't save though; with car finance, the interest amount is calculated up front, and added to the pricipal, and that's divided by the number of months in the term. Because of that, putting money in really only means your last x months are paid in advance. You don't reduce the amount you pay nor the interest you're paying.

Exactly.

 

[Pyro]

It won't save though; with car finance, the interest amount is calculated up front, and added to the pricipal, and that's divided by the number of months in the term. Because of that, putting money in really only means your last x months are paid in advance. You don't reduce the amount you pay nor the interest you're paying.

Mine works differently. Before NCA it was the case, but now they must recalculate the interest based on your outstanding balance.

I saved more than R500 a month on interest because I was 40K ahead. And every month this amount increases because the extra money comes off your outstanding amount.

 

[Smurfatefrog]

It won't save though; with car finance, the interest amount is calculated up front, and added to the pricipal, and that's divided by the number of months in the term. Because of that, putting money in really only means your last x months are paid in advance. You don't reduce the amount you pay nor the interest you're paying.

You will save, you just wont see it reflected on your statement until a settlement figure is reached. If you pay it off a few months into financing they cant charge you the full interest.
If you want to pay in large random amounts the payment will probably need to be re-structured with a fee of cos

It will get calculated the same way as bonds & loans, the whole accounting system for finance agreements is just accounted for using deferred interest and not current interest

 

[JayM]

It won't save though; with car finance, the interest amount is calculated up front, and added to the pricipal, and that's divided by the number of months in the term. Because of that, putting money in really only means your last x months are paid in advance. You don't reduce the amount you pay nor the interest you're paying.

Nope, the laws have changed and they are not allowed to do this. If you have a car which is financed I suggest speaking to your bank to get it changed.

 

[Claymore]

Nope, the laws have changed and they are not allowed to do this. If you have a car which is financed I suggest speaking to your bank to get it changed.

Ah, OK, I wasn't aware they'd changed it.