Understanding Your Car Payment (Interest-Bearing) 

close up calculator and toy car

When making your car payment, you may have questions about how much you owe on your contract. Here are answers to a couple of those questions:

How are your monthly payments applied to what you owe on your contract?
Your monthly payments on your contract (the agreement you signed at the dealership) are a combination of the finance charge (interest) and the amount financed. The amount financed is the amount you agreed to pay the dealer for your car, along with any additional products and accounting for your trade-in if you have one. The finance charge can be thought of as the fee charged for not paying the entire cash amount when you purchase your vehicle. Your finance charge for each payment period is determined by the following equation:

Amount Financed x Daily Interest Rate x Number of Days Between Payments = Finance Charge.

Here’s an example: Let’s say your contract has an amount financed balance of $15,000 and an annual interest rate of 18 percent. If the period between payments is 30 days, the finance charge for that payment period is $221.91 = ($15,000 x 0.18) / (365) x (30).

As you continue making monthly car payments over the life of your contract, the amount of the finance charge you owe decreases as a percentage of your overall payment.

Using our example above, if your hypothetical monthly payment were $300, the finance charge of $221.91 on your first payment would be almost 74% of your initial payment. If you continue making payments on time, the percentage of your payment going towards the finance charge will decrease and more of your payment will go towards your amount financed. Since the finance charge accrued is based on how long the amount financed remains unpaid, the quicker you repay your contract, the less finance charge you will have to pay.

What would you owe if you paid off your contract today?
At any time during the life of your contract, you can request a payoff quote from Credit Acceptance. A payoff quote will let you know exactly how much it would take to pay off your contract at that point in time. A payoff quote includes what remains of your amount financed, together with any unpaid finance charge and other fees that may have accrued on your contract. A payoff quote can be less than the amount you would pay if you paid off your contract as scheduled over its full term.

When you finance your vehicle through a dealership enrolled in the Credit Acceptance program…
Our goal is to ensure you are equipped with the knowledge, tools, and resources to make sound financial decisions while making payments on your vehicle. Credit Acceptance is an indirect auto finance company that works with more than 12,000 new and used car dealerships across the nation to help car buyers like you get approved for financing on a vehicle, regardless of your credit history.

If you are looking to get financing on a new or used car…
Simply see if you pre-qualify on our website and we’ll connect you with a car dealership in your area that can help you get started.

Start your auto financing pre-qualification today!

If you are a Credit Acceptance customer…
You can log into your account to see more details regarding your retail installment contract with Credit Acceptance.