No. 1538 October Term, 1979 Appeal from Order of July 6, 1979 of the Court of Common Pleas of Montgomery County, Civil Division, No. 78-17437.
William G. Blasdel, Jr., Philadelphia, for appellants.
William A. Harvey, Philadelphia, for appellees.
Price, Cavanaugh and Watkins, JJ.
[ 283 Pa. Super. Page 76]
In March, 1975 the appellants purchased a new Diamond Reo tri-axle dump truck from Holly Jon Equipment Company. The cash price of the vehicle was $44,564.00, including sales tax. The appellants received credit for a trade-in of their old dump truck in the amount of $12,100.00. The balance of $32,464.00 plus credit life insurance in the amount of $358.00 was to be financed by Holly Jon Equipment Company over a four-year period. The total to be financed was $32,822.00 and Holly Jon prepared the necessary sales papers and financing documents. At the time of the sale, the Motor Vehicle Sales Finance Act permitted a finance charge in the amount of seven and a half percent per year.*fn1 The seller determined the finance charge by multiplying the principal amount to be financed ($32,822.00) by seven and one half percent and multiplying the result by the number of years the contract was to be run (4 years) and arrived at a finance charge of $9,846.60. The finance charges were added to the principal obligation of $32,822.00 for a total payback figure of $42,668.00. The monthly payments were calculated by dividing the $42,668.60 by 48 to arrive at a monthly payment of $888.93.
Appellants, at the time of purchasing their vehicle, were in the same position as many buyers of new vehicles. The buyer generally waits while the salesman makes complex calculations, the nature of which are seldom understood by the buyer, to arrive at that important figure known to the consumer as the monthly payment. What appellants may not have been aware of in this case was that the seller was determining the finance charge by a method known as the "add-on" method. Under this method the finance charge is
[ 283 Pa. Super. Page 77]
calculated at the beginning of the term of an installment sales contract by multiplying the principal amount by the rate specified in the contract and multiplying that figure by the number of years of the contract. Another method of determining interest is to use the simple interest method which is computed on the declining balance of principal indebtedness and which is always less, in total, than the add-on rate.
Shortly after the sale was completed Holly Jon Equipment Company assigned all of its interest under the contract to Associates Financial Services Company, Inc., a third-party defendant in the court below and an appellee in this appeal.
In 1978 appellants commenced an action in assumpsit against Holly Jon Equipment Company alleging that Holly Jon had calculated the amount of interest due in violation of the interest rate allowed under the Motor Vehicle Sales Finance Act. Appellants sought to recover three times any excess interest paid, attorney fees and costs in accordance with the provisions of the Usury Act.*fn2 Appellees filed motions for summary judgment which were granted by the court below. Appellants have appealed to this Court from the order granting summary judgment in favor of appellees.
Appellants contend that the amount of interest charged was in excess of the interest rate allowed under the applicable provisions of the Motor Vehicle Sales Finance Act in that it exceeded an annual percentage rate of seven and one half percent. The basic facts in this case are undisputed and it is agreed that the dump truck purchased by appellants was a Class IV vehicle. The Motor Vehicle Sales Finance Act provides in 69 P.S. § 619 A as follows:
A seller licensed under the provisions of this act shall have the power and authority to charge, contract for, receive or collect a finance charge, as defined in this act, on any installment sale contract covering the retail sale of a motor vehicle in this Commonwealth, which shall not
[ 283 Pa. Super. Page 78]
exceed the rates indicated for the respective classification of ...