Hi, I really stink at math. I know this is a simple problem, but I don't know how to do it. Can someone help me figure out what the interest rate is on this?

I want to buy something that costs $3,403.61 and it has the following payments IF I put $1,000 down. For 12 months, it is a payment of $225-235 monthly; for 24 months, it is $125-135 a month; for 36 months it is $90 - 100. HOW do I figure out what the rate is? I called the dealer back, and he said he 'thought' it was about 12%, but it varies depending on the amount down, total amount, etc.

Is this just a matter of doing some division? Thanks so much!

PS----IS 12% considered high?

In this example, I'm going to assume that you pay back for 12 months and the payment is $235 a month. The actual purchase price I'm using will be based on a $1000 down payment being subtracted from $3403, giving a purchase price of $2403.

Here's how to figure it out:

Multiply the number of payments by the amount of each payment to figure out the total amount you'll pay back: 12 x $235 = $2820

Then, subtract the price of the item from the total that you pay back. The difference is the dollar amount of interest you'll be paying: $2820 - $2403 = $417

Finally, take the dollar amount of interest and divide it by the purchase price:
$417 / $2820 = .1478 which is 14.8% interest.

Remember, you need to figure the interest rate on the actual amount you borrow, not the starting price. Subtract any down payments from the starting price and use that figure when determining the amount of interest you'll be paying. If the seller gave an estimate of 12% interest, then they are using the total price before a downpayment is made, which is not correct and will make the interest rate appear lower than it actually is.

Just for fun, I did the figures for 24 and 36 months. 24 months is 34.8% 36 months 49.8%!!!!
(I used the highest figures for the monthly payments in both calculations).


Hope my example makes sense and helps you decide what to do.

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Okay, using the following calculator:

Free Online Calculators - Try Them Here

Your interest rate with $1K down and $225 a month for 12 months is just over 22% which is high. I guess what "high" is depends on what you are buying.

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Proud to say I haven't shopped at a Wal-Mart since Sept 2003

If it's a car or anything for that matter 22% is TERRIBLE !.. When we got my van 3 years ago our credit was not the best, just didnt have enough credit. I/we got a APR of 5 % on 9999.99 with only 500.00 down.. I wanted to do a 24 month load but the man entered it at 42 months . I didn't notice it till after everything was paid, since I told him 24 months i assumed he did it at 24 months. When he told me my payments were 245.00 I was like HUH ? no it should be 350.00 PLUS. ( with tags, title and taxes ). Thats when I saw he did it at 42 months and was too late to change it. good lord the title, tags and taxes were UNGODLY .. then had to pay again to our city for the tags overage not charged at dealership 200.00 Plus.

maybe you should check around before settling on a APR of anything over 11%..
Good Luck.

Why not just save up and pay cash for it? You may be able to barter if you flash the cash and you won't be paying on it for years and years. Is it a "need" or a "want?" Why pay someone interest when you could be earning it yourself?

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I've had a Foreman Grill for about six years. I've done about 85% of my cooking on it, but I've never burnt myself. Probably because I don't use it as a pillow.

Thanks, you guys! Thanks so much, I truly am terrible with math. Thanks for explaining this stuff to me!

Tagetgirl, you said, "If the seller gave an estimate of 12% interest, then they are using the total price before a downpayment is made, which is not correct and will make the interest rate appear lower than it actually is." Thank you for that tip! I had NO idea!! Oh my head is swimming with these numbers tho! But thanks for explaining this to me. I have Discalculia, which is like dyslexia when it comes to numbers.

Also, "Just for fun, I did the figures for 24 and 36 months. 24 months is 34.8% 36 months 49.8%!!!! (I used the highest figures for the monthly payments in both calculations)"

What?! OMG---those numbers really put things into perspective! Holy cow!! 49.8%!!!! That is CRAZY!!!!!!!!!!!!! Thanks for explaining this--you have saved me from probably making a huge mistake!

Thanks, Sexysmurf for that link to the calculator. I'll bookmark it!

What this purchase is for is a Honda Ruckus 50cc 2009 scooter which retails by Honda MSRVP at $2,499. After they add in tax, title, tag, and assembly fee, it came to $3,406! I said 'what if we put $1,000 down, what can we do on financing?' and the above numbers is what they gave me.

Outrageous.

I agree those rates are AWFUL ! You could probably find a used scooter cheaper. Good Luck

You are very welcome.

I'm no math genius but I have made it a point to make myself aware on how to figure out things such as interest so I have an idea of if something is a good deal or not. I may not always get the exact correct answer but I'll be close enough to know if I'm getting taken or not.

Just think, if you borrow $2403 and pay it back for 36 months at $100 a month, you're paying back $3600. That tiny calculation alone, which can be easily done with no calculator, shows you'd be getting ripped off.

I think this is the type of real life math scenario that should be taught in school. This sort of knowledge has done much more to help me out in life than anything they tried to teach me in trionometry. I have as of yet to do any graphing in my day to day life, lol!

(Yes, I understand that trig, calculus and the like are necessary for some people but practical math can benefit ALL people and should be given it's fair share of teaching time.)

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You are so right---I was taught these things in school, but I was horrible with math. The stuff just confuses the heck out of me. It's like a foreign language.

What would you guys say is a good rate for a small $2,000 loan right now? I don't know if I should try to get a small loan or put this on my AMEX card.. I have never even used my AMEX card. I plan to call them tomorrow to ask about how much payments would be if I put this purchase on the card. Maybe my bank can loan me some money? I have a lot of homework to do!

If the finance company / bank / dealership can't give you the answer, I would be walking away - fast. I would want it in writing before I signed anything.

targetgirl......I very much agree. The schools should teach the basics (and the parents should too) so that we have much better informed consumers ready to make better decisions.

People in financial trouble cry it's not their fault, they were over their heads, they don't make enough money, no one told them, etc. They can't even add up their income, add up their outgo and subtract to see which way the plus or minus swings !!!!!!!!

Gone are times past where people simply don't spend if they can't afford the item. It's a misconstrued need /vs/ want balance in so many ways.

dl

Stupid me...........when I was at the dealer, I asked ALL of the right questions, but forgot that most important one, of what the interest RATE was. STOOPID me! So I came her eand got you guys to help me out, and thanks for the quick help! Then, I called the dealer and asked them what they quoted me--what the interest rate was--and they told me 12%! I didn't think this sounded right...

How do you prevent them from ripping you off, sheesh?! I have spent the weekend doing some hard research online, and now my head is swimming, LOL.

I recommend that you make a little "cheat sheet" and carry it in your purse/wallet. Write on it how to go about figuring out the rate of interest on a loan and then use it to figure out the interest rate on anything BEFORE you sign on the dotted line.
Make it as simple or complicated as you need, it's your tool for you to use so it makes no difference if it doesn't make sense to anyone else.

I'm glad that you're concerned about making sure you get the best deal and don't get taken advantage of. Good luck.

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Jesus SAVES by shopping smartly and using double coupons!

Excellent idea, Tatergirl, thanx!! I am going to do that.