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Which offer costs less · Lesson 9 of 9
Fees on a car loan from the APR gap
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The dollar fee is the loan minus the amount the APR would support for the same payment. It is paid at the start.
The steps
The payment is computed from the note rate and the amount financed. The APR is then used to find what principal that payment would correspond to. If that principal is smaller, the difference is the fee.
A gap under a dollar is dropped. Matching rate and APR means no fee on this estimate.
It does not join the balance
The chart starts at the amount financed, not at the amount financed plus the fee. You are treated as having paid the fee in cash.
A contract that rolls the fee into the principal will not match until you add those dollars to the price. Then set the APR equal to the note rate if the fee is no longer “prepaid,” or you will count it twice.
In the comparison
Each offer keeps its own fee. The hold adds the fee to interest and compares the sums. Ownership costs are outside that sum.
Use the fee to see the gap. Use the buyer’s order to see the line items.
This explains how WiseCalculator treats the numbers you type. It is not a lender’s offer and it is not advice for your loan.
More in Car
- The first month of a car loanInterest in month one is the full amount financed times the monthly rate. Principal is the rest of the payment.
- Yearly interest on a car loanThe yearly table sums principal and interest for each twelve months and keeps a running interest total.
- When the car balance falls fastestThe balance falls fastest at the end of the loan, when interest is small and almost the whole payment is principal.