Can someone explain how these loans work - Toyota FS

Hi Everyone,

Hoping someone smarter than me can explain how these loans work. I financed my 2020 tacoma through Toyota at 1.9% APR for 60 months. It put the automatic payments at $619.31/mo. I haven't paid any extra any of the months nor have I missed a payment. I currently have 19 payments left on it. However, it says the remaining balance is $12,178.64 but 19 payments of $619.31 puts it at $11,766.89. If the monthly payment created by toyota was at $619.31, why is there a $411.75 discrepancy? Trying to understand this better so I don't get hit with a $1,031.06 final payment unexpectedly. Don't know if this info is relevant but the payoff amount is $12,198.28. Any insight would be helpful.

Thanks!

 

Look closely at your monthly statements. You will see that a portion of the monthly payment goes to interest. So not all of your monthly payment goes toward the principal, part of it goes to interest.

I always record payment minus interest in the books so I know where it's going. As your loan matures you'll see the total monthly interest decrease because it's based off the remaining principal.

 

It's called amortization. Basically, as you pay on the loan, the payments front load paying most of the interest first. It's not just an even total divided by 60 months. Play with this calculator to see if this makes sense. Auto Loan Calculator

 

You can make a separate payment on the principal which will go right to the cost of the car.
You don’t need to make big payments for it to make a difference. We paid our car off a year early
by adding only like a $100.00 and specifically putting it on the principal.
You can set that up on your online payments however, if you are paying on the principal only through the mail, it needs to be sent to a different address.
Even if you can’t do it every month, anything would help.

 

Thanks guys, I always figured the $619.31 was figuring in the interest. So if I increase my monthly payment by $21.67 for the remaining 19 payments would that resolve the issue? Given I dont try to pay it off earlier. I was trying to figure out how much earlier I could pay it off if I increased my monthly payments and thats what started this.

 

Hey i know the last payment might be more, but just be happy you got 1.9% instead of 5%. I wish mine would have been lower

 

More than likely u have a lower pay off amount . Sometimes payments take a little bit to post to current balance owed when u make a payment . So when they gave you the pay off amount the payment was not applied yet .

 

As mentioned above, just throw what you can at it besides the monthly payment and specify it's a payment against the principal. We would throw $400, $200, $100 at it every other month or so and paid them off early. When the time comes (you'll probably forget lol) and it's paid off, it's paid off early make sure to inquire about a refund on the gap insurance. Almost every lender rolls gap insurance into a loan, if it's paid off early that money is yours.

 

^ this is most likely the issue. The payoff amounts get funky sometimes. Keep your monthly payment as is.

 

Oh im thrilled I got that, it was like a month before the shortage so I got it with 1.9% APR and no dealer markup and I was able to negotiate some stuff too. Got really lucky with that timing lol.

 

Ill keep an eye on it and see if it changes, thanks for the insight

 

Ill try to look into this too, never knew about the gap insurance. Thanks!

 

Glad you timed it right! Hopefully they go down and we can all refinance our rigs to a lower rate. But until then

 

My recent experience. We had 2 payments left on our 4Runner, so I made the 2nd to last payment and checked the payoff value after the payment had posted. The payoff was showing quite a bit more than the remaining balance for a while, but at some point they updated it and it came down. The last payment was less than our regular monthly, likely due to making all payments several days early. If you consistently make late payments, your payoff balance at the end will go up due to additional interest.

I *think* when I paid off my truck early I got a refund, but don't remember exactly.

 

Im not sure how long it takes to update the payoff amount, im almost up to my next payment though so I think its already updated, either way im going to try to pay it off early if i can. Thanks for all the info everyone