I bought a car 2 years ago and have been making great (very low) payments! However, I didn’t see a clause in my contract stating that the interest rate would be evaluated at the end of 24 months. The bank sent me a notice that my nominal annual rate increased from a balmy 2.5% to a blistering 9.25% for the remainder of my 5 year term. If my original loan was $20, 000, how much more money will this bank make versus the loan I rejected with a nominal rate of 4.75% for the entire term? Payments are monthly, and compounding is monthly as well.
BONUS: What down payment would I need in order to make the two alternative loans equal? Meaning, I don’t care about the interest changing on me because I pay the same at the end of the loan.