KRS 190.110: Finance charges -- Rates -- Computations.

(1) The finance charge allowed by this subsection may be precomputed by using an

add-on method. If the finance charge in a retail installment sale is precomputed it

shall not exceed the following rates:

Class 1. Any new or used motor vehicle designated by the manufacturer by a year

model not earlier than the year in which the sale is made -- eleven dollars

($11) per one hundred dollars ($100) of principal balance, as determined

pursuant to KRS 190.100(2), per year of the contract.

Class 2. Any new motor vehicle not in class 1 and any used motor vehicle

designated by the manufacturer by a year model of one (1) or two (2) years

prior to the year in which the sale is made -- thirteen dollars ($13) per one

hundred dollars ($100) of principal balance, as determined p ursuant to KRS

190.100(2), per year of the contract.

Class 3. All other motor vehicles not in class 1 or 2 -- fifteen dollars ($15) per

one hundred dollars ($100) of principal balance, as determined pursuant to

KRS 190.100(2), per year of the contract.

(2) If the finance charge applicable to a retail installment sale is precomputed and the

retail installment contract provides for successive monthly payments, substantially

equal in amount, the maximum finance charge computed pursuant to subsection (1)

of this section for a partial year occurring at the beginning of a contract with a term

of less than one (1) year or at the end of a contract with a remaining term greater

than a year shall be prorated at the annual maximum amount of finance charge

computed under subsection (1) of this section, based on the number of months in

the partial year.

(3) If the finance charge applicable to a retail installment sale is precomputed and the

retail installment contract provides for unequal or irregular installment payments ,

the maximum finance rate of the finance charge shall be at the effective rate

provided in subsection (1) of this section, having due regard for the schedule of

payment.

(4) Alternatively, the seller may, at his option, compute the finance charge in a ret ail

installment sale on a simple interest basis, taking into account the actual number of

days between payments under the contract using a fixed or variable rate not to

exceed the effective rate of finance charge permitted under subsection (1) of this

section.

(5) For the purposes of subsections (3) and (4) of this section, the effective rate of the

finance charge permitted by subsection (1) of this section shall be the rate computed

in accordance with the actuarial method or the United States Rule method f or a

retail installment contract that provides for:

(a) The total finance charge permitted under subsections (1) and (2) of this

section;

(b) Successive monthly payments substantially equal in amount; and

(c) The purchase of a vehicle of the same vehicle c lass over the same term as the

unequal or irregular installment payment contract subject to subsection (3) of

this section or the simple interest basis contract subject to subsection (4) of

this section. In computing the effective rate, the seller may make any

assumptions and use any method that the Truth in Lending Act and the

regulations promulgated thereunder would permit in computing the annual

percentage rate.