So I bought a car last year for 37k total and put 12k down making my loan 25k, 6 years with a 3% APR. My cars current value is 30k. From what I’ve heard and have seemed to find online is that the bank still owns 25k on the car, the 5k I’ve paid so far on the loan is theirs and doesn’t go towards my ownership of the loan/car, and I only get 5k back. Is that correct? I don’t understand why but I’m also not the most financially versed
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Just to show you the math for 12 months of payments:
A $25k loan on a 6yr 3% APR compounded monthly means the monthly payment should be around $380. The principal (loan amount) and interest are what make up the monthly, but the ratio of how much is for what changes (the % towards interest starts higher and then goes lower). For 12 months that ~$4560 of monthly payments had ~$700 towards interest and ~$3860 towards principal. As such, the $25k loan has ~$21,140 left on principal, so if there is no pre-payment penalty, then you can make a payment of around that much (excluding any additional interest if you wait till the next month, and whatever other fees the dealership may have) and you will have paid off the loan, if keeping with the ~$380/mo for 5 more years, that is a total of ~$22,800, so an extra ~$1560 if you want to continue paying it off in 5 years instead of getting it done now.
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