# Monthly Finance Charge=Interest **URL:** \ **Category:** The BBQ Pit\ **Created:** [February 15, 2009, 11:33pm UTC](https://boards.straightdope.com/t/monthly-finance-charge-interest/486005 "2009-02-15T23:33:21Z")\ **Posts on this page:** 20\ **Page:** 1
**Author:** ![treis](https://avatars.discourse-cdn.com/v4/letter/t/bc79bd/32.png) [@treis](https://boards.straightdope.com/u/treis)\ **Post date:** [February 15, 2009, 11:33pm UTC](https://boards.straightdope.com/t/monthly-finance-charge-interest/486005/1 "2009-02-15T23:33:21Z")
Car companies have been pulling this crap for a while now. They advertise 0% APR or some crap, and then have a a monthly finance charge. In other words, they won’t charge any interest, but they will charge a $25 monthly fee per $1000 borrowed. I’m not retarded. A monthly fee based on the amount that I borrow is interest no matter what you say. A $25 monthly fee per $1000 is a ~2.5% APR. Fucking liars. ---
**Author:** ![dgrdfd](https://avatars.discourse-cdn.com/v4/letter/d/eb8c5e/32.png) [@dgrdfd](https://boards.straightdope.com/u/dgrdfd)\ **Post date:** [February 15, 2009, 11:48pm UTC](https://boards.straightdope.com/t/monthly-finance-charge-interest/486005/2 "2009-02-15T23:48:08Z")
I didn’t know that’s how those places worked. So they are kind enough to give you a 0% loan, but then they charge a 30% finance fee? Wow. ---
**Author:** ![Rand\_Rover](https://avatars.discourse-cdn.com/v4/letter/r/db5fbb/32.png) [@Rand\_Rover](https://boards.straightdope.com/u/Rand_Rover)\ **Post date:** [February 15, 2009, 11:51pm UTC](https://boards.straightdope.com/t/monthly-finance-charge-interest/486005/3 "2009-02-15T23:51:41Z")
Maybe gonzomax will find this thread and let us all know what’s really going on here. ---
**Author:** ![Una\_Persson](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/una_persson/32/346_2.png) [@Una\_Persson](https://boards.straightdope.com/u/Una_Persson)\ **Post date:** [February 16, 2009, 12:02am UTC](https://boards.straightdope.com/t/monthly-finance-charge-interest/486005/4 "2009-02-16T00:02:27Z")
> [@Rand\_Rover](#): > > Maybe gonzomax will find this thread and let us all know what’s really going on here. And maybe monkeys will fly out of my butt. FTR, $25 a month per $1,000 is not 2.5% APR, it’s somewhat higher… ---
**Author:** ![Frank](https://avatars.discourse-cdn.com/v4/letter/f/3d9bf3/32.png) [@Frank](https://boards.straightdope.com/u/Frank)\ **Post date:** [February 16, 2009, 12:06am UTC](https://boards.straightdope.com/t/monthly-finance-charge-interest/486005/5 "2009-02-16T00:06:18Z")
> [@Una\_Persson](#): > > FTR, $25 a month per $1,000 is not 2.5% APR, it’s somewhat higher… 30% I’ve never heard of this. What car companies, **treis**? ---
**Author:** ![catsix](https://avatars.discourse-cdn.com/v4/letter/c/e19b73/32.png) [@catsix](https://boards.straightdope.com/u/catsix)\ **Post date:** [February 16, 2009, 12:58am UTC](https://boards.straightdope.com/t/monthly-finance-charge-interest/486005/6 "2009-02-16T00:58:41Z")
Here’s a direct quote from [Mitsubishi](http://www.mitsubishimotors.com/MMNA/jsp/specialoffers.do?loc=en-us) > [@](#): > > 2008 Eclipse > 0.0% APR for 60 months (60 monthly payments of $16.67 per $1,000 financed at 0.0% APR) > Available through Mitsubishi Motors Credit of America, subject to approved credit and insurance. Some customers will not qualify. Retailer price, terms and vehicle availability may vary. Other lease terms/details apply. Factory cash rebates are not available with APR offers. Program ends 03/02/09. So if you borrowed 1000$ from them today at 0% interest, you would pay them $16.67 sixty times. That is a total of $1000.20 after 60 payments. Contrast this with their 2009 Eclipse offer: > [@](#): > > 2009 Eclipse > 4.9% APR for 60 months (60 monthly payments of $18.83 per $1,000 financed at 4.9% APR) > Available through Mitsubishi Motors Credit of America, subject to approved credit and insurance. Some customers will not qualify. Retailer price, terms and vehicle availability may vary. See your Mitsubishi retailer for details. Other lease terms/details apply. Factory cash rebates are not available with APR offers. Program ends 03/02/09. You borrow 1,000 for 5 years at 3.9%. Sixty payments of 18.83$ is $1129.80. You are paying them 129.80 to borrow their thousand dollars for five years. They break the number down into ‘per thousand financed’ so that it’s easier to figure out what your payment would be. Frex, a brand new Mitsubishi Eclipse, 2008, that is currently at a 26,000$ MSRP would be: 26 X 16.67/month = 433.32 monthly payment. No way would a car company get away with charging a 25$ finance charge on $1000 for a month. That would be an interest rate so high as to be usury. ---
**Author:** ![MadPansy64](https://avatars.discourse-cdn.com/v4/letter/m/dc4da7/32.png) [@MadPansy64](https://boards.straightdope.com/u/MadPansy64)\ **Post date:** [February 16, 2009, 1:22am UTC](https://boards.straightdope.com/t/monthly-finance-charge-interest/486005/7 "2009-02-16T01:22:02Z")
> [@Frank](#): > > I’ve never heard of this. What car companies, **treis**? I’ve seen ads by local finance companies and used car lots that seem to be offering something similar. Perhaps the OP meant to say resellers of automobiles rather than auto manufacturers or their authorized dealers? ---
**Author:** ![catsix](https://avatars.discourse-cdn.com/v4/letter/c/e19b73/32.png) [@catsix](https://boards.straightdope.com/u/catsix)\ **Post date:** [February 16, 2009, 1:24am UTC](https://boards.straightdope.com/t/monthly-finance-charge-interest/486005/8 "2009-02-16T01:24:51Z")
> [@](#): > > **MadPansy64** said: > I’ve seen ads by local finance companies and used car lots that seem to be offering something similar. Perhaps the OP meant to say resellers of automobiles rather than auto manufacturers or their authorized dealers? I’ve never seen one that says ‘finance charge’. I _have_ seen dozens (at every interest rate) that says what your payment is, per thousand, for how many months. You can see a mathematical breakdown of that above. The ‘monthly payment’ number is not a finance charge. It may, if the interest rate is above 0%, include the finance charges, but it is not a finance charge in and of itself. ---
**Author:** ![DMC](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dmc/32/18049_2.png) [@DMC](https://boards.straightdope.com/u/DMC)\ **Post date:** [February 16, 2009, 1:35am UTC](https://boards.straightdope.com/t/monthly-finance-charge-interest/486005/9 "2009-02-16T01:35:57Z")
> [@treis](#): > > Car companies have been pulling this crap for a while now. They advertise 0% APR or some crap, and then have a a monthly finance charge. In other words, they won’t charge any interest, but they will charge a $25 monthly fee per $1000 borrowed. I’m not retarded. A monthly fee based on the amount that I borrow is interest no matter what you say. A $25 monthly fee per $1000 is a ~2.5% APR. Fucking liars. Can I get a cite for this? I just find it really hard to believe that they’re charging $25 a month per thousand dollars, as that would be a finance charge of $750 a month over the roughly $500 a month you’d owe towards the car. I really find it hard to believe that someone would pay over $1250 a month for a $30K car that is advertised at 0.0% financing. $25 a month period, I can see. $25 per thousand over the life of the loan, sure. $25 a month per thousand, not buying it without further evidence. ---
**Author:** ![catsix](https://avatars.discourse-cdn.com/v4/letter/c/e19b73/32.png) [@catsix](https://boards.straightdope.com/u/catsix)\ **Post date:** [February 16, 2009, 1:37am UTC](https://boards.straightdope.com/t/monthly-finance-charge-interest/486005/10 "2009-02-16T01:37:38Z")
> [@DMC](#): > > Can I get a cite for this? > > I just find it really hard to believe that they’re charging $25 a month per thousand dollars, as that would be a finance charge of $750 a month over the roughly $500 a month you’d owe towards the car. I really find it hard to believe that someone would pay over $1250 a month for a $30K car that is advertised at 0.0% financing. > > $25 a month period, I can see. $25 per thousand over the life of the loan, sure. $25 a month per thousand, not buying it without further evidence. Using **treis’s** own numbers, 25$ would be the total monthly payment on a 0% APR loan taken out for 40 months. ---
**Author:** ![DMC](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dmc/32/18049_2.png) [@DMC](https://boards.straightdope.com/u/DMC)\ **Post date:** [February 16, 2009, 1:42am UTC](https://boards.straightdope.com/t/monthly-finance-charge-interest/486005/11 "2009-02-16T01:42:48Z")
> [@catsix](#): > > Using **treis’s** own numbers, 25$ would be the total monthly payment on a 0% APR loan taken out for 40 months. No, using **treis** ’ own numbers, there would be a $25 fee **per month, per thousand dollars** borrowed, or $750 dollars per month in fees. Again, I want a cite if I’m to believe that. ---
**Author:** ![catsix](https://avatars.discourse-cdn.com/v4/letter/c/e19b73/32.png) [@catsix](https://boards.straightdope.com/u/catsix)\ **Post date:** [February 16, 2009, 1:44am UTC](https://boards.straightdope.com/t/monthly-finance-charge-interest/486005/12 "2009-02-16T01:44:26Z")
And what I’m saying is that **treis** is mistaken. What he/she is calling a ‘finance charge’ is what is typically put into car ads as ‘payment of’ per thousand financed. I would have a hard time believing that any car manufacturer would call that a finance charge. ---
**Author:** ![MadPansy64](https://avatars.discourse-cdn.com/v4/letter/m/dc4da7/32.png) [@MadPansy64](https://boards.straightdope.com/u/MadPansy64)\ **Post date:** [February 16, 2009, 1:45am UTC](https://boards.straightdope.com/t/monthly-finance-charge-interest/486005/13 "2009-02-16T01:45:52Z")
> [@catsix](#): > > I’ve never seen one that says ‘finance charge’. I _have_ seen dozens (at every interest rate) that says what your payment is, per thousand, for how many months. > > You can see a mathematical breakdown of that above. The ‘monthly payment’ number is not a finance charge. It may, if the interest rate is above 0%, include the finance charges, but it is not a finance charge in and of itself. I’ll double check on Wednesday, but, IIRC, the signboard I’m thinking of says **No interest!! $25 mth finace charge ONLY EZ qualify** It is a local “finace” and payday loan company sharing a building with a used car lot that initially attracted my attention because of the misspelling. I have spent far too much time contemplating the price of plastic letters, the defintion of “mth” and why “qualify” & “interest” are spelled correctly, but “finance” is not. ---
**Author:** ![DMC](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dmc/32/18049_2.png) [@DMC](https://boards.straightdope.com/u/DMC)\ **Post date:** [February 16, 2009, 1:51am UTC](https://boards.straightdope.com/t/monthly-finance-charge-interest/486005/14 "2009-02-16T01:51:29Z")
> [@catsix](#): > > And what I’m saying is that **treis** is mistaken. What he/she is calling a ‘finance charge’ is what is typically put into car ads as ‘payment of’ per thousand financed. > > I would have a hard time believing that any car manufacturer would call that a finance charge. But the amount that advertisers put into their car ads as “payment of” per thousand financed is $16.67 on a 0.0% loan, not $25, so I’m still curious where this $25 per thousand is coming from. I think I’ll just wait for **treis** to clarify. ---
**Author:** ![catsix](https://avatars.discourse-cdn.com/v4/letter/c/e19b73/32.png) [@catsix](https://boards.straightdope.com/u/catsix)\ **Post date:** [February 16, 2009, 1:53am UTC](https://boards.straightdope.com/t/monthly-finance-charge-interest/486005/15 "2009-02-16T01:53:07Z")
> [@DMC](#): > > But the amount that advertisers put into their car ads as “payment of” per thousand financed is $16.67 on a 0.0% loan, not $25, so I’m still curious where this $25 per thousand is coming from. I think I’ll just wait for **treis** to clarify. That’s a 60 month loan. **treis** never said how long the term of the loan was, but it stands to reason that the duration of the loan changes the number of payments, which changes the amount of each payment. ---
**Author:** ![DMC](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dmc/32/18049_2.png) [@DMC](https://boards.straightdope.com/u/DMC)\ **Post date:** [February 16, 2009, 1:53am UTC](https://boards.straightdope.com/t/monthly-finance-charge-interest/486005/16 "2009-02-16T01:53:46Z")
> [@MadPansy64](#): > > I’ll double check on Wednesday, but, IIRC, the signboard I’m thinking of says > **No interest!! > $25 mth finace charge ONLY > EZ qualify** > > It is a local “finace” and payday loan company sharing a building with a used car lot that initially attracted my attention because of the misspelling. I have spent far too much time contemplating the price of plastic letters, the defintion of “mth” and why “qualify” & “interest” are spelled correctly, but “finance” is not. See, this I can buy. It’s misleading, since it does indeed simply switch out interest for the finance charge, but it’s certainly not usurious, and translates to a pretty good interest rate (even though it’s not the advertised 0.0% rate). ---
**Author:** ![catsix](https://avatars.discourse-cdn.com/v4/letter/c/e19b73/32.png) [@catsix](https://boards.straightdope.com/u/catsix)\ **Post date:** [February 16, 2009, 1:56am UTC](https://boards.straightdope.com/t/monthly-finance-charge-interest/486005/17 "2009-02-16T01:56:51Z")
What I don’t get about that is that **treis** said car companies, and payday loan and used car shark lots are not really ‘car companies’. ---
**Author:** ![Fear\_Itself](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/fear_itself/32/19637_2.png) [@Fear\_Itself](https://boards.straightdope.com/u/Fear_Itself)\ **Post date:** [February 16, 2009, 2:24am UTC](https://boards.straightdope.com/t/monthly-finance-charge-interest/486005/18 "2009-02-16T02:24:44Z")
> [@catsix](#): > > No way would a car company get away with charging a 25$ finance charge on $1000 for a month. That would be an interest rate so high as to be usury. I was not aware that usury was prohibited. Banks are [exempt from state usury laws](http://www.lectlaw.com/files/ban02.htm): > [@](#): > > Banks have separate rules. In fact, due to high inflation, in 1980, the federal government passed a special law which allowed national banks (the ones that have the word “national” or the term “N.A.” in their name, and savings banks that are federally chartered) to ignore state usury limits and pegged the rate of interest at a certain number of points above the federal reserve discount rate. In addition, specially chartered organizations like small loan companies and installment plan sellers (like car financing companies) have their own rules. ---
**Author:** ![MadPansy64](https://avatars.discourse-cdn.com/v4/letter/m/dc4da7/32.png) [@MadPansy64](https://boards.straightdope.com/u/MadPansy64)\ **Post date:** [February 16, 2009, 2:25am UTC](https://boards.straightdope.com/t/monthly-finance-charge-interest/486005/19 "2009-02-16T02:25:28Z")
> [@catsix](#): > > What I don’t get about that is that **treis** said car companies, and payday loan and used car shark lots are not really ‘car companies’. I mentioned that. > [@MadPansy64](#): > > Perhaps the OP meant to say resellers of automobiles rather than auto manufacturers or their authorized dealers? We’ll just have to wait for the OPs clarification as to whether he meant car “manufacturer” or car “seller”. I’m hoping he does realize they are not the same. ---
**Author:** ![Frank](https://avatars.discourse-cdn.com/v4/letter/f/3d9bf3/32.png) [@Frank](https://boards.straightdope.com/u/Frank)\ **Post date:** [February 16, 2009, 2:59am UTC](https://boards.straightdope.com/t/monthly-finance-charge-interest/486005/20 "2009-02-16T02:59:44Z")
> [@catsix](#): > > So if you borrowed 1000$ from them today at 0% interest, you would pay them $16.67 sixty times. That is a total of $1000.20 after 60 payments. Look, I want my 20 cents. 'Cause otherwise, that means that every eighteen years and nine months, I can’t get a newspaper. [Next page](https://boards.straightdope.com/t/monthly-finance-charge-interest/486005.md?page=2)