Question about finance charges

retired2pa1

If a car is financed and only one payment is made during the finance period but paid off the following month, what happens to the finance charges? Can it be refunded?

kyfdx

retired2pa1 said:

If a car is financed and only one payment is made during the finance period but paid off the following month, what happens to the finance charges? Can it be refunded?

Finance charges only accumulate, over time. There are no finance charges, once the principal is paid off.

retired2pa1

I had just lost my husband so the details of this transaction were a little unclear to me so I checked my paperwork and this was what happened. I purchased the car on 12/19/23 and financed at 8.72% for 84 months. The Finance Charges were $5,880.64. I decided to pay off the car on 1/19/24 instead of making payments. My first payment wasn't due until 2/2/24. My contract with the dealership say: "You may prepay all or part of the unpaid part of the Amount Financed at any time without penalty. If you do so, you must pay the earned and unpaid part of the Finance Charges and all other amounts due up to the date of your payment." Shouldn't I be due to the finance charges refunded?

kyfdx

retired2pa1 said:

I had just lost my husband so the details of this transaction were a little unclear to me so I checked my paperwork and this was what happened. I purchased the car on 12/19/23 and financed at 8.72% for 84 months. The Finance Charges were $5,880.64. I decided to pay off the car on 1/19/24 instead of making payments. My first payment wasn't due until 2/2/24. My contract with the dealership say: "You may prepay all or part of the unpaid part of the Amount Financed at any time without penalty. If you do so, you must pay the earned and unpaid part of the Finance Charges and all other amounts due up to the date of your payment." Shouldn't I be due to the finance charges refunded?

"If you do so, you must pay the earned and unpaid part of the Finance Charges and all other amounts due up to the date of your payment."

That only means that you had to pay the Finance Charges that had been earned, until you paid off the car on 01/19/2024. So, your amount should have been the total amount of the purchase, plus the one month of finance charges.

The finance charges were never paid (other than the first month). The finance charges from the contract, was only if you had financed for the entire amount for the 84 month term.

retired2pa1

Right. That's my question. Shouldn't I have a refund for the finance charges (for 84 months), minus one month? I contacted the bank and they say they don't have any record of this loan (???) because it was paid off and has cleared their system. I don't know how to pursue this for more clarification.

kyfdx

retired2pa1 said:

Right. That's my question. Shouldn't I have a refund for the finance charges (for 84 months), minus one month? I contacted the bank and they say they don't have any record of this loan (???) because it was paid off and has cleared their system. I don't know how to pursue this for more clarification.

There are no other finance charges. If the car was paid off in one month, there were no more finance charges. Finance charges are paid when you make the payments, over time. The finance charges never happened. That $5880 only happened if you paid the car during the 84 months.

You paid off the principal. You never paid interest, so no finance charges.

retired2pa1

DUH! I finally get it. Sorry for being so dense. Since my husband died, I'm in a constant fog about everything. Thanks for your patience.

kyfdx

retired2pa1 said:

DUH! I finally get it. Sorry for being so dense. Since my husband died, I'm in a constant fog about everything. Thanks for your patience.

I'm sure it is confusing. Sorry to hear about your husband.