Finance a Used Car at 18.3%

Financing a Used Car at 18%

There was an article in the paper the other day about people getting screwed over by dealers when financing cars. They would get some financing at the time of purchase and then within several weeks to a couple of months later, they would get their finance terms changed. The customer would have to agree to the new terms or return the car.

The article profiles one person in Maryland who purchased a 2004 (7-years-old) Mercury Sable for $10,175. He’d pay 278 per month over 54 months. WTF!

I did some crunching in Excel and their original loan terms was an 18.3% loan. That’s insane. The customer would end up paying over $15K for a $10K car. The dealer then changed the terms to $375 per month for 36 months. That rate was about 19.4%. However, the cost of financing was only $3,500 because of the shorter time period.