I am buying a used car from a private seller and he is writing out a contract with all the details.
The car is $10,000 and I paid him $5540 as a down payment so the remaining balance is $5560.
I decided to pay him a weekly $75 for it and so it will take about 17-18 months.
Your math is off from the start.
$10,000-$5540=$4460. The remaining balance is $4460, not $5560.
You owe $4460
If you pay $75 every week for 18 months you would pay a total of $5400. That means you paid $940 in interest.
It cost you $940 to borrow $4460 for 18 months.
These kinds of private party financing almost always go bad. Even if you have a "contract" you and the seller have very little protection from the many things that can go wrong.
The seller was very dumb to agree to this kind of deal. Surely, he wasn't dumb enough to give you the title to the car.
What happens if you get a few months into the deal and the seller wants his car back? It's still his car until he signs over the title to you. Who's paying for insurance? Who is the car registered to? If he still has the insurance, has he listed you as a regular driver -- or will his insurance company permit him to do it?
Does he still have a loan on the car? If so, he has sold the car illegally. His loan company or bank won't permit it.
What happens if you wreck the car and want to give it back? Do you get your money back? You shouldn't because you've been "renting" his car and driving it. Wo gets the insurance money -- if there is insurance?
What if the car will need major repairs? Who's going to pay for it?
Like I said, an informal "contract" between two individuals is hardly worth the paper it's written on. Even if you or the seller took the "contract" to Small Claims Court, you might get a judgement, but it still has to be enforced -- which is the hard part.
That is under 74 weeks for the principle. The rest is interest. I’ve no idea what interest rate.
Are you really doing this, or is this a math problem? I have a hard time believing any seller would agree to this.
Hi best of luck as you will need it.
Add the total cost and deduct the cost of the car. There figure left is the interest.
$10,000 - $5,540 = $4,560, not $5,560.
$4,560 financed @ 7% interest over 17 months is 4,803. Over 18 months it's $4,817. That's $283 and $285 a month respectively.
Now, a few important points.
1) Private seller financing can be risky. A lawyer should look at the contract.
2) You need to insure the car for liability, collision, and uninsured / under-insured motorist coverage. If you don't, and you get in an accident, you need to be sure that what you owe this guy will be covered. So, before you buy you had better find out how much they'll insure the car for and how much it will cost. If they won't insure it ffor the amount you are paying for it, then you had better be prepared to make up the difference in cash.
3) The seller is probably going to hang onto the title until the car is paid off, so you'll need to determine if and how you can license and insure a car that you do not hold the title to. In some states, you can't do that. If you're under 18, you can't even get your own insurance.
4) Something should be in the contract that specifies what happens if the car suffers a
break-down. Chances are, the seller won't do anything to help you. Therefore you should have it thoroughly test driven and inspected by a shop or other competent person to determine if there are any problems or impending problems.
5) BUYER BEWARE!!!! Know exactly what you're getting into before you jump.
78 weeks to pay, $300 in interest (interest compounded monthly), $5860 total. You will need to pay $85 in the 78th week.