This example comes from used car software that is approved in Texas, a state which calculates interest using a true daily earnings method (definition below):
The terms are:
- Amount financed: 5,000
- Interest rate: 15%
- Number of payments: 24
- Frequency: monthly
- Loan starts: 01/01/2012
Here are the terms that are generated:
- APR: 15.0065%
- 23 payments of: 242.64
- 1 final payment of: 237.32
- Finance charge: 818.04
- Total payments: 5,818.04
Here is the amortization table.
Texas defines true daily earnings as such:
(20) True daily earnings method--The true daily earnings method is a method to compute the finance charge by applying a daily rate to the unpaid principal balance. The daily rate is 1/365th of the equivalent contract rate. The earned finance charge is computed by multiplying the daily rate of the finance charge by the number of days the actual unpaid principal balance is outstanding.
My question is how are they getting the APR of 15.0065%?