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  1. #1
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    Variable Rate Car Loan (Office 2K)

    My son is telling me that I am undercharging him by 39 cents. I loaned him $6500 to be paid over a 3 year period (36 months) and the rate is tied to my home equity loan. Thusfar he thinks I am wrong and he is right. Attached is the spreadsheet. What am I doing wrong if anything or is HE wrong?
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  2. #2
    WS Lounge VIP sdckapr's Avatar
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    Re: Variable Rate Car Loan (Office 2K)

    How did he calculate it?

    Your way seems correct, but I'm a chemist not an accountant or banker.

    Steve

  3. #3
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    Re: Variable Rate Car Loan (Office 2K)

    I couldn't see a flaw in the calculation either but then I'm an engineer <img src=/S/grin.gif border=0 alt=grin width=15 height=15>

    However, I did see a flaw in the logic.
    Anyone scoring a car at home equity rates who is complaining about any 39 cents difference has a serious need to meet the real world <img src=/S/crazy.gif border=0 alt=crazy width=15 height=15>
    I've loaned my kids money in similar ways for computers, cars, and houses) - in each case they've had to sign a formal contract, and live with my calculations. I've always been happy to debate those calculations - but only if they could present a calculation that demonstrated an error in mine.

    My suggestion, like the previous reply, is to post the alternative calculation (which of course does not make yours in error).

    My assumption is that, because of the changes of interest rates, 39 cents is a reasonable difference based on possibly different ways to approach the judegments of when and how to change a payment based on interest rate changes. That is you may each be making a "correct" calculation but, 39 cents represents an alternate, also correct calculation. That is - you calculate a month's interest rate as (interest / 12) - an alternate, also correct calculation may use (interest * daysinmonth/366). It is probably that the bank uses a daily method - but hey, a profit of 39 cents is negligible.

    To summarise - in the commercial world the lender's correct calculation is the correct one even if alternate methods exist.

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