Understanding Your Car Payment (Precomputed) 

chalkboard with percentage marks

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

What do you owe over the life of your contract?
The amount you agreed to pay over the life of your contract (the agreement you signed at the dealership) is the total balance reflected in your contract. The total balance combines the amount financed (principal) and the finance charge (interest).

The amount financed is the amount you agreed to pay the dealer for your vehicle, along with any additional products and accounting for your trade-in (if you had one).

The finance charge is the amount of interest you will owe over the life of the contract. This can be thought of as the amount you pay for not having to come up with the entire cash amount on the day you bought your car.

Credit Acceptance calculates the total balance reflected in your contract by including the finance charge for the entire life of the contract in the total balance upfront. This is known as the precomputed method.

Here’s an example of how the precomputed method works: If your amount financed is $30,000 and the finance charge is $10,000 over the life of the contract, the total balance of your contract would be $40,000. The $10,000 finance charge included in the total balance is the total interest you will pay over the life of your contract.

How are your monthly payments applied to what you owe in your contract?
If you pay more than the monthly payment due, the excess amount you pay will go towards the following month’s payment (assuming you have no past due amounts owed and you do not owe any other fees or charges). For example, if your required monthly payment due is $150 and you pay $200, the additional $50 will go towards the following month’s payment.

If you consistently pay more than your required monthly payment, you may wind up paying off your contract early (example: in 46 months rather than 48 months). If you pay off your contract two months early, for example, you will not have to pay the last two months’ worth of finance charge. Paying ahead consistently increases your chances of paying off your vehicle early, reducing the amount of finance charge you will 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, which will let you know exactly how much it would take to pay off your vehicle at that point in time. Often, this amount is smaller than your total balance because paying off your contract in full before the term is complete may allow you to avoid a portion of the finance charge.

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’re looking to get financing on a new or used car…
Simply fill out the auto finance pre-qualification form on our website to get started.

Start your auto financing pre-qualification today!

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