They factor in the interest as part of the amortization process (that's the whole calculation magic, to be honest), but if you paid extra, it SHOULD reduce your principal by the amount of the extra payment. What it means is that even though your payments stay the same over time (i.e. for the 5 years), you will end up paying off the loan early, so it won't be for the full 60 months. Net effect is paying less interest.larphraulen wrote: ↑Nov 8th, 2017 12:18 pmIs this a dealer/manufacturer - financed 5 year loan? I would weigh the benefits of paying that off earlier vs. something like putting a bigger dent into the mortgage or contributing to savings.
If they structured it the way VW did mine, they priced in the total amortized interest (5 years worth) ahead of time, then split that total up into monthly payments. So no matter what, they're receiving 5 years worth of interest regardless of how fast it's paid off.
ie: Whether you pay it off in 1 year or use the full 5, you might already on the hook for the total interest amount for 5 years.