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Auto Loan Scenario
Posted on 11/2/24 at 9:11 pm
Posted on 11/2/24 at 9:11 pm
In the market to buy my wife a new car and looking at financing options. Obviously trying to get a low payment and also pay it off as fast as possible. My question is if I can get a longer term loan that has a similar interest rate and lower monthly payment then just turn around and pay a huge one time payment to then shorten the loan length (knock out a lot of the interest long term). Is there any drawback to that/ is that an option? I’ve read some loans have a fee to pay early so obviously want to check that. But anything else to look for?
3
Posted on 11/2/24 at 9:25 pm to AUVet21
quote:
AUVet21In the market to buy my wife a new car and looking at financing options. Obviously trying to get a low payment and also pay it off as fast as possible. My question is if I can get a longer term loan that has a similar interest rate and lower monthly payment then just turn around and pay a huge one time payment to then shorten the loan length (knock out a lot of the interest long term). Is there any drawback to that/ is that an option? I’ve read some loans have a fee to pay early so obviously want to check that. But anything else to look for?
I always ask if there’s a penalty if I pay off early and have been told no on the last 20 things I’ve financed. I do 60 months on all my cars and pay them off in a few months to 30 months.
Posted on 11/2/24 at 10:22 pm to AUVet21
You won’t get a longer term loan with a similar interest rate, that defeats the purpose of pricing risk into a loan. Just get a 36 month at under 2% and carry on.
Posted on 11/2/24 at 10:28 pm to LemmyLives
Where do you see a rate that low? Everything online I’m seeing is lowest rates of around 4%. And I have excellent credit so that isn’t an issue
Posted on 11/3/24 at 7:02 am to AUVet21
Ford. I got 1.9 for 36 in May.
Posted on 11/3/24 at 8:18 pm to LemmyLives
quote:
Ford. I got 1.9 for 36 in May.
On what vehicle, if you don’t mind me asking.
Posted on 11/4/24 at 7:49 am to AUVet21
Check out Signature federal credit union. Rates are some of the best around and they're great to deal with. Have a bike and recently a truck through them.
Posted on 11/4/24 at 12:21 pm to AUVet21
What are the actual comparisons here, are we talking going from a 36mo loan at 4.9% to 60 months at 5.9%? or whats the real story, because whats similar to you might not be so similar over time
I would argue if you're worried about the monthly payment being too much it might not be a car you can afford comfortably. When it comes to vehicles I like the money guy method of 20/3/8. Should be able to put 20% down, pay it off in 3 years and it shouldnt be more than 8% of your gross monthly income on the payment side. If you cant afford the vehicle on that method, then I would look at something cheaper, not take the payments out a couple extra years to be a couple hundred cheaper a month maybe.
The biggest issue most people have who choose long terms is they end up getting another vehicle before they ever even pay off the current one. You should live your life as car payment free as you can and thats where something like paying it off in 36 mo or less can keep you on track. IT's 1 thing to say yeah I'll take a the 60 mo loan for 1% higher rate but pay it off like a 36 mo loan still, another thing to actually stick to that and do that.
Also always check manufacturer interest rates even for used because they can be quite surprising at times. We got 1.49% for 36mo on my wife's CPO 2022 MDX we got earlier this year.
I would argue if you're worried about the monthly payment being too much it might not be a car you can afford comfortably. When it comes to vehicles I like the money guy method of 20/3/8. Should be able to put 20% down, pay it off in 3 years and it shouldnt be more than 8% of your gross monthly income on the payment side. If you cant afford the vehicle on that method, then I would look at something cheaper, not take the payments out a couple extra years to be a couple hundred cheaper a month maybe.
The biggest issue most people have who choose long terms is they end up getting another vehicle before they ever even pay off the current one. You should live your life as car payment free as you can and thats where something like paying it off in 36 mo or less can keep you on track. IT's 1 thing to say yeah I'll take a the 60 mo loan for 1% higher rate but pay it off like a 36 mo loan still, another thing to actually stick to that and do that.
Also always check manufacturer interest rates even for used because they can be quite surprising at times. We got 1.49% for 36mo on my wife's CPO 2022 MDX we got earlier this year.
This post was edited on 11/4/24 at 12:27 pm
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