Bankrate Auto Loan

The bank is financing my wife for 9606.00 at an interest rate of 7.5%. The duration is 5 years (60 months) What should be the monthly payments?

I used to be able to do, but I think I'm missing something.

Here's how I made my calculations:

I took $ 9606.00 and multiplied it times 7.5% and came in with $ 720.45. Then I added that $ 720.45 to $ 9,606.00 and came with a total of $ 10,326.45. I then divided the $ 10,326.45 by 60 (months) and came with a total of $ 172.10. This means that $ 172.10 would be my monthly payment.

I went to bankrate.com and used their auto loan calculator and they came up with $ 192.48

The bank came up with $ 205.00 (I think they added credit, life and disability)

So what the heck I miss ...... Please help!

$ 192.48 is the correct payment.
Using the form below -
P = principal = 9606.00
I = annual interest rate = 0.075
L = 5 years
Then:
J = monthly interest = 0.075/12 = 0.00625
N = number of months financed = 12 * 5 = 60
Plug all these values in the form below and you will receive the monthly payment. Any insurance, etc. will be added to this amount.

FYI - How do you figure the amount is incorrect on some points. First, just interest calculated for 1 year ($ 720.45) for 5 years, the interest would be $ 3,600 instead! However, you do not have that much interest on the loan term, because you continue to make payments. Each payment reduces the amount you owe, reducing the burden of interest on the principal outstanding.

Although the amount of the payment does not change throughout the duration of the loan, how it gets divided in fact. From the beginning, most of your payment goes to interest, whereas towards the end of 5 years, most of your payment applies to principal.

Good luck!

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The correct answer is bankrate.com.

9606 = / Payment (.075/12) x (1-1 / ((1 + (.075/12))) ^ 60)

or payment = 9606 * (.075/12) / ((1-1 / ((1 + (.075/12))) ^ 60) = 192.48 $ ...

Forgot to properly account compound interest and would pay a value of one year.

The way you calculated the interest, you were only 1 year of interest (9606 x 075). But after a year you still have some of the money borrowed, the bank wants interest of 7.5% on the amount outstanding in year 2 (plus interest on amounts due in years 3, 4 and 5).

The formula is very difficult to write on this site so I'll break it into two parts.
Let i = interest rate per period (assuming that 1 month), if i = 0.075/12 = 0.00625
Let the number of periods (months, in this case, n = 60)
Consider a new variable called "A" is equal to one-

a = (1 - (1 + i) ^-n) / i = (1 - (1.00625) ^ -60) / 0.00625
an = 49.90530818

The monthly payment is equal to $ 9,606, then / a $ = 192.4845342
or just $ 192.48.

Note: Add at the end of 1 month when the first payment is made, interest expense would be $ 60.04 (9606 x 0.00625) and the rest of payment (192.48-60.04 = 132.44) would reduce the principal amount outstanding.) At the end of 2 months when the 2nd payment is made, the outstanding loan balance would be $ 9,606.00 - $ 132.454 = $ 9,473.56. The interest due on that amount would be $ 59.21 (9,473.56 x 0.00625) and the balance of the 2nd payment would be $ 133.27, which would reduce the amount of principal owed.

Bankrate uses a loan amortization schedule (monthly payment $ 1,000 to pay principal and interest installments.