Setting a car loan

Sat Feb 21 19:12:24 EST 2015

Regarding amortization tables: My experience with my bank is that they were
reluctant to make predictions about the outstanding balance or amount of
interest paid for each payment. It may be that the loan officer didn't
understand my request (perhaps I didn't have the necessary vocabulary) but
I think the reality is they don't like making predictions. It's easy to
write a program to run every business day to update the loan status (i.e.,
if the date is on or after the date when we're supposed to loot Charlie's
account and we haven't looted it yet this month, then loot it right now and
calculate how much of the payment goes to interest and how much to
principal reduction). It's much harder to write a program to predict those
things in the future because of holidays.

The problem isn't just one of computation; new holidays could be introduced
during the lifetime of the loan. E.g., "Family Day" was introduced by
legislation in Saskatchewan in 2007 (
http://www.timeanddate.com/holidays/canada/family-day), doubtless without 5
years of lead time for the banks to prepare. That would mess up loan
predictions.

I'm guessing the bank would not want to be held to a prediction, given the
uncertainty of the future. Better just to keep track of how much is owed
and recalculate each payment.  It's easy to develop an approximate
amortization table with a little bit of math or a calculator or a
spreadsheet or whatever. But because of rounding errors and irregularities
in the payment dates, those tables will be off by a small amount, which
could undermine confidence and even lead to lawsuits.

The bank will, on the other hand, comply quickly if you ask for a statement
of account which gives info about past activities.

Perhaps my experience is peculiar to Canada. I've never understood, for
instance, why electronic banking in Canada can't just go on during weekends
and holidays, and why it could take 3 business days (which could be 6
days!) for my electronic bill payments to arrive, even though they depart
instantaneously. I imagine some wizened old bankers in the basement
printing out my payment requests and dropping them in a pneumatic tube ...

On 21 February 2015 at 11:11, Andy Pastuszak <apastuszak at gmail.com> wrote:

> I'll try that as soon as I get an amortization table.  I never got one
> with my initial paperwork.  For that matter, I never even got the name of
> the bank.  I had to call the dealership to get the name of the bank, and
> then call the bank to find out where to make the payment.  My "truth in
> lending" statement had the dealership listed as the "bank" and just showed
> the total amount financed, the interest rate and the monthly payment.
>
> Andy
>
>
> On 2/21/2015 11:46 AM, David Carlson wrote:
>
>> On 2/21/2015 10:13 AM, Andy Pastuszak wrote:
>>
>>> Thank you everyone.  I will do just that.  Going to stop by a bank
>>> branch and pick up an amortization table from them and then adjust
>>> monthly.  It seems bank math and real math are two different things.
>>>
>>> Andy
>>>
>>> On 02/21/2015 11:08 AM, Paul Warthe wrote:
>>>
>>>> I agree with Maf.
>>>>
>>>> A few years ago my office tried to create a loan tracking program to
>>>> match one our funder was trying to get us to use (it had numerous
>>>> deficiencies in other areas that caused working with it to be a
>>>> nightmare). After trying numerous other pre-packaged loan programs,
>>>> researching and trying several formulas, we could not match the
>>>> formula used in the tracking program our funder provided. We came
>>>> close, but for our needs we were required to be spot on with what the
>>>> funder's program would produce.
>>>>
>>>> Paul
>>>>
>>>> -----Original Message-----
>>>> From: gnucash-user
>>>> [mailto:gnucash-user-bounces+warthes7=gmail.com at gnucash.org] On
>>>> Behalf Of Maf. King
>>>> Sent: Saturday, February 21, 2015 9:50 AM
>>>> To: gnucash-user at gnucash.org
>>>> Subject: Re: Setting a car loan
>>>>
>>>> On Sat 21 February 15 10:36:07 Andy Pastuszak wrote:
>>>>
>>>>> I tried to set up my car loan in Gnucash and the calculated monthly
>>>>> payment doesn't match what the bank says I owe.  Gnucash says the
>>>>> monthly payment should be $294.78, but the bank makes me pay $299.11.
>>>>>
>>>>> Thing is, I put the loan into other financial software and also comes
>>>>> up with $294.78.  So, it's obviously not the math that Gnucash is
>>>>> doing to calculate the payments.
>>>>>
>>>>> Is there some way to deal with this situation?  Am I just stuck
>>>>> entering transactions manually?
>>>>>
>>>>> The loan has 61 payments, and I am thinking that payment 61 is
>>>>> probably not a full payment and that's screwing up the math.
>>>>>
>>>>> Is there a way to deal with loans that have a final payment that is
>>>>> different from all the others when trying to schedule payments?
>>>>>
>>>> IMHO,  it doesn't matter what GC or any other software says - the
>>>> agreement with the bank is what is going to happen.  A few quid per
>>>> month either way is close enough to confirm the bank are not
>>>> overcharging - it all depends on when they apply the interest, and if
>>>> interest is charged on the applied interest etc....
>>>>
>>>> I would just schedule 61 payments in the SX subsystem, according to
>>>> the lendor's schedule, and reconcile periodically that the loan
>>>> agreement is being honoured.
>>>>
>>>> If the final payment is less, well you have a few £ extra that month
>>>> - you'll spot it quickly when you reconcile the bank account - and
>>>> then a one-off manual adjustment is made...
>>>>
>>>> 0.02
>>>> Maf.
>>>>
>>>>
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>> I seem to recall that some banks start the interest clock right away but
>> do not require a payment until 45 or 60 days after the loan is
>> initiated.  The effect is about the same as if you calculated a new loan
>> amount larger than what they financed by the interest accumulated during
>> that delay.
>>
>> Try changing the loan value upward  by about half of the first month's
>> interest and the start date to 30 days before the first payment is due.
>> You will probably see the exact values in the amortization table that
>> they give you.
>>
>> David C
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>
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-- 
Edward Doolittle
Associate Professor of Mathematics
First Nations University of Canada
1 First Nations Way, Regina SK S4S 7K2

« Toutes les fois que je donne une place vacante, je fais cent mécontents
et un ingrat. »
-- Louis XIV, dans Voltaire, Le Siècle de Louis XIV, Chap. XXVI