Annuity In Advance

You know those darned obligations that chip into your treasured mani/pedi fund (like your car payment)? This is an example of annuity in advance (aka annuity due).

These payments take place at the same time at the beginning each period. (Yep, it’s a real dinger of a buzz kill. After all, reliability isn’t your strong suit when your digits are in need of a tune up.)

So, in this instance, let’s assume that your car payment is due on the first of the month, every month, in the amount of $300. This exemplifies annuity in advance because all of your payments must be paid on the same date at the beginning of the period (which in this case is a month) in the same amount every single month. So the car payment covers you for the month that follows...you are paying on February 1 to cover the expense for February...hence the "advance" part.