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How do I determine a finance charge on a car loan?

I’ve read all about car loans and I found that I need to reduce my finance charges to pay the least amount of money possible. The only problem is that I don’t know how to calculate them. How can I determine the finance charge on a car loan?

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Jack Walsh · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
To determine a finance charge on a
car loan
, you first have to understand what a finance charge is. A finance charge is the total interest, fees, taxes, and other charges paid over the life of the loan. To calculate your finance charges, subtract the total amount of interest, fees, taxes, and charges from the principal (total amount borrowed) on your loan.
If you want to get a better understanding, take the monthly payment and multiply it by the number of months in the loan. Then, subtract this amount from the principal.
An example may help you comprehend this idea a bit better. Let’s say you got a car loan that has 48 monthly payments of $679, but your total principal is $35,000. To get your finance charges:
  • 48 x $679 = $32,592
  • $35,000 - $32,592 = $2,408
  • Finance charges = $2,408
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