Car Payment Question (Need some clarifications here)

[Anguyen92]

All right, guys.  I got a car payment question here and you guys are more reliable than anything I found on Google so far, so here goes.

Say my household make a monthly car payment in the amount of $370 a month (the loan is a 60 month term and the total amount of the autoloan is $19,600) and the payment is broken down to $306.86 going to the principal balance and $63.14 to the interest.  Apparently, this is determined by the simple interest method.

If my household made two payments of $185.00 afterwards before the next monthly payment is due, the first $185.00 payment is broken down to $140.97 principal, $44.03 interest and the second $185.00 payment is $141.29 principal and $43.71 interest.

How come the total principal amount of the two $185.00 payments is less than the principal amount if I were to make just the one monthly payment of $370.00?  Should my household not approach it this way?  I just want some further clarifications from some smart minds here that's been in similar spots before.

Edit: Ok, I think I actually figured it out thanks to getting a better understanding of the simple interest method and fiddling around with some formulas in Excel, but I still want to hear the rational from another perspective.

[Stadler]

Plastics!   No, it's timing.

Simple interest (i.e. no compounding) is just the number of days (or weeks, or months, whatever) times the interest rate for that period times the principal outstanding.  So assuming a constant payment amount (of $370), each payment will have a greater percentage of principal, because the interest charged will be on a lesser amount for that period.

Something isn't adding up - pun very much intended - with your post, though.   I think it's just "not enough information".   With simply interest, it's in your benefit to pay early, because interest is NOT compounded, it's paid in full each period.  So if you take out your loan on October 1st, and agree that the payments are $370 starting November 1st, if you pay $185 on October 15th, and $185 on November 1st, you SHOULD be paying less interest not more, because 15 days of that interest calculation is on a lower principal (from the first payment).  So without knowing what  periods you're talking about it's hard to tell why you're numbers are greater, except in the general sense, TIMING.       

[Anguyen92]

Yeah, I figured out what happened when it comes to the loan.

So it turned out that by understanding this formula better (Interest paid = principal of the loan * (interest rate which is around 4.89% for me/365) * number of days in between payments), I get why the interest amount is what it is.  I made the $370 payment 24 days after I accepted the loan terms, and then made the $185.00, 17 days after that payment and then the next $185.00 17 days after that.  The interest would be always $63.00 on that first payment, no matter how much I would have paid whether it would have been $400 or $500, since it is calculated based on the number of days for me to make the payment.

Like I said, I fiddle around with that formula in excel and did some calculations and I should be fine provided that I continue to pay off the $370 before the monthly due date.  You are correct, Stadler, in that if I am able to continue making consistent payments, the principal amount would be greater than the previous principal amount and the interest charged will be less than the previous interest charged and that why the math lines up is due to timing.  Also, I understand how it is to my benefit to make two biweekly payments instead of just once a month since it would lower (very very slightly, but slightly nonetheless) the amount of interest paid since the principal amount owed is lowered.  Thank you.

It's hard to believe I actually understand all of that moreso than when this sort of example was thrown at me in my finance class in college.  I learned nothing of relevance in that class, but the teacher sucked (he wouldn't let us write down the answers of questions we got wrong in exams after the grade was posted when I had a face to face meeting with him.  How am I supposed to learn from that?)