Stuck in loan?
06-09-15, 01:14 AM
#1
Lead Lap
Thread Starter
Stuck in loan?
I talked to a guy today that has a lot of business degrees. The past 10 years I have paid cash for a car and not financed anything. I learned tonight that there is something called straight line interest. I got financed at 5.6% on the deal thus making it $5,133 in interest over 6 years. I talked to the people I bought the car from and they said it wasn't any early pay off pentaly. I thought that I could pay the car off in 3 years and won't have to pay all that interest. I learned that if I pay it off tomorrow I will be stuck with the same interest. I offered to put more down they said I didn't need to do it. I was going to pay the taxes with my own money and they said no. I could have bought the entire car with cash. I also have proof in writing that I paid the dealership and they didn't put it all in the loan papers. What kind of options do I have left and anyone ever have this happen to them? this could have happened at any dealership. Why do they still get all that interest money if I pay it off in 1 day even???
06-09-15, 04:25 AM
#2
I talked to a guy today that has a lot of business degrees. The past 10 years I have paid cash for a car and not financed anything. I learned tonight that there is something called straight line interest. I got financed at 5.6% on the deal thus making it $5,133 in interest over 6 years. I talked to the people I bought the car from and they said it wasn't any early pay off pentaly. I thought that I could pay the car off in 3 years and won't have to pay all that interest. I learned that if I pay it off tomorrow I will be stuck with the same interest. I offered to put more down they said I didn't need to do it. I was going to pay the taxes with my own money and they said no. I could have bought the entire car with cash. I also have proof in writing that I paid the dealership and they didn't put it all in the loan papers. What kind of options do I have left and anyone ever have this happen to them? this could have happened at any dealership. Why do they still get all that interest money if I pay it off in 1 day even???
06-09-15, 06:39 AM
#4
Pole Position
i have a lot of experience in the auto finance business and have never heard of "straight line interest". I've heard of "precomputed interest" or "rule of 78" (which are loans where they are heavily front loaded with the interest payback) but never "straight line". I haven't heard of an auto dealer OR auto lender using anything OTHER than "simple interest" contracts for a long time now. Sounds like you're dealing with a very very shady auto dealer and more than likely they are using their OWN in house financing and even their own retail installment contract (contract which has the terms/conditions of the loan, including the Regulation Z disclosures, APR, Term, Finance Charge, Total of payments).
My first move would be to call the listed lien holder of the finance contract and to see if the credit extended to you was through an outside company or not. Doubtful that a legit auto finance company is using anything other than a "simple interest" contract that has no prepayment penalties and won't require full interest payment in the event of early payoff.
My next move would be to contact your state's Used Motor Vehicle and Parts Commission and file a complaint. That organization (at least here in Oklahoma) has jurisdiction over the used car dealers and they swing a big stick. Plus, it doesn't cost you any money to pursue...unlike an attorney.
My first move would be to call the listed lien holder of the finance contract and to see if the credit extended to you was through an outside company or not. Doubtful that a legit auto finance company is using anything other than a "simple interest" contract that has no prepayment penalties and won't require full interest payment in the event of early payoff.
My next move would be to contact your state's Used Motor Vehicle and Parts Commission and file a complaint. That organization (at least here in Oklahoma) has jurisdiction over the used car dealers and they swing a big stick. Plus, it doesn't cost you any money to pursue...unlike an attorney.
06-09-15, 07:08 AM
#5
Seriously, is he buying a Kia, or a Honda, or a Mercedes AMG GT, or a Lexus? I've noticed a lot of posts lately are garbled gibberish with horrendous spelling, grammatical errors, and a lack of any cohesive thought or purpose. Not you, BinaryJay, you're one of the most rational, useful posters at Club Lexus.
06-09-15, 07:09 AM
#6
I talked to a guy today that has a lot of business degrees. The past 10 years I have paid cash for a car and not financed anything. I learned tonight that there is something called straight line interest. I got financed at 5.6% on the deal thus making it $5,133 in interest over 6 years. I talked to the people I bought the car from and they said it wasn't any early pay off pentaly. I thought that I could pay the car off in 3 years and won't have to pay all that interest. I learned that if I pay it off tomorrow I will be stuck with the same interest. I offered to put more down they said I didn't need to do it. I was going to pay the taxes with my own money and they said no. I could have bought the entire car with cash. I also have proof in writing that I paid the dealership and they didn't put it all in the loan papers. What kind of options do I have left and anyone ever have this happen to them? this could have happened at any dealership. Why do they still get all that interest money if I pay it off in 1 day even???
06-09-15, 08:33 AM
#7
Normally the official dealerships do not have this set up (exactly), there is compounded interest that can be minimized by accelerating pre-payment or making a larger down payment, BUT (and this is where they pull the wool over your eyes) on the new car financing they have "cash purchase discount" of a at least a couple of thousand usually.... rather than thinking of that as a discount view that as the fixed cost of getting the financing (this is how they get money on financing you with a 0% over 60months types of arrangements... in these cases you have zero incentive to pre-pay, and you feel great about having no interest while you usually pay at least bit of attention that you actually paid more than you would have if you paid cash... so clearly the loan was not free)
Anyhow, next time read the fine print. Never, ever sign something that you did not read, for all you know you gave away a lung and your liver.
There are plenty of other loan agreement set ups, and everyone looks for all sorts of way to nickel and dime you. Some loans have a lien release... so even though you paid the loan off you still need to pay to get the lender off the people who own the asset (car loans may have this fee, and mortgages always do)
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06-09-15, 09:03 AM
#8
Sorry to be harsh, but bascially because you did not read the fine print when you signed and agreed to it. The interest you owe for the term of the is pre-determined, paying everything off (including interest) does not incur you any penalties. (seems pretty standard loanshark/streetcorner type of credit arrangement). If it makes you feel better, don't use the word "interest" and you can call it a service chage, and account fee, or whatever.
Normally the official dealerships do not have this set up (exactly), there is compounded interest that can be minimized by accelerating pre-payment or making a larger down payment, BUT (and this is where they pull the wool over your eyes) on the new car financing they have "cash purchase discount" of a at least a couple of thousand usually.... rather than thinking of that as a discount view that as the fixed cost of getting the financing (this is how they get money on financing you with a 0% over 60months types of arrangements... in these cases you have zero incentive to pre-pay, and you feel great about having no interest while you usually pay at least bit of attention that you actually paid more than you would have if you paid cash... so clearly the loan was not free)
Anyhow, next time read the fine print. Never, ever sign something that you did not read, for all you know you gave away a lung and your liver.
There are plenty of other loan agreement set ups, and everyone looks for all sorts of way to nickel and dime you. Some loans have a lien release... so even though you paid the loan off you still need to pay to get the lender off the people who own the asset (car loans may have this fee, and mortgages always do)
Normally the official dealerships do not have this set up (exactly), there is compounded interest that can be minimized by accelerating pre-payment or making a larger down payment, BUT (and this is where they pull the wool over your eyes) on the new car financing they have "cash purchase discount" of a at least a couple of thousand usually.... rather than thinking of that as a discount view that as the fixed cost of getting the financing (this is how they get money on financing you with a 0% over 60months types of arrangements... in these cases you have zero incentive to pre-pay, and you feel great about having no interest while you usually pay at least bit of attention that you actually paid more than you would have if you paid cash... so clearly the loan was not free)
Anyhow, next time read the fine print. Never, ever sign something that you did not read, for all you know you gave away a lung and your liver.
There are plenty of other loan agreement set ups, and everyone looks for all sorts of way to nickel and dime you. Some loans have a lien release... so even though you paid the loan off you still need to pay to get the lender off the people who own the asset (car loans may have this fee, and mortgages always do)
06-09-15, 09:15 AM
#9
Lexus Test Driver
If you can circumnavigate the 0% interest rate to your benefit, without incurring any penalties, you can use the cash to invest into other things and earn money, rather than sinking the cash into a car that is depreciating even as we type. Paying cash has its benefits, but it's being smart with your money that actually gets you somewhere. Considering that's over 4-5 years, you can make a lot more money investing that cash.
06-09-15, 10:49 AM
#10
Lead Lap
Thread Starter
I read everything carefully, I just didn't understand the entire contract. I told the guy I wanted to pay it off in 3 years I had no idea I had to pay all the interest from 6 years if I do it in 3.
06-09-15, 12:15 PM
#11
Krava, no one even knows what kind of car you're talking about. If it's not a 3rd generation Lexus GS, this thread needs to be moved to another topic. If it's not even a Lexus, why are you posting at Club Lexus in the first place?
06-09-15, 05:34 PM
#12
Lead Lap
Thread Starter
I posted here because I know the people here more then anywhere else. I got scared etc and felt trapped. I didn't even sleep last night. Anyway I called the bank up and this is a simple interest loan so if it is paid off I don't pay the interest. The guy I talked to that has the degrees I guess don't know anything. I am not sure if I posted before or not in this thread but: BinaryJay I believe I helped you out quite a bit when you had the carbon build up problem and suggested what to do about it when that dealer that you had didn't want to fix it. I ended up with a 2014 acura RLX advanced with 6k Miles on it for $36,500. I did have the 4th Gen GS on the list in the top spot but I was not happy when I found out that the 3gs engine can't ever be fixed no matter what. Also due to the lying and cheating car dealership here (Lexus of Shreveport, (you have to see the post where they told me the car had low oil because it had a leak in which it didn't and sewell lexus fixed it free of charge and not trying to charge me $5,000), so I jumped ship and went to acura. I still don't regret my decision. I do want the GSF but so far no info out about it. I posted here instead of the acura place because people here respond faster and I didn't know what to do and felt trapped. I didn't know about everything in this loan, I got $15,500 back for the totaled GS300 and wanted to put it toward the new car and then I thought that I was trapped with the interest. what would be the use paying $15K toward this car loan if I would still pay the same interest I would be paying if I took 6 years? that wouldn't make since to me. I felt like I just threw another $5,000 away because of the interest charges on the loan I got now. Anyway everything is fine and you can close the thread.
06-10-15, 06:28 AM
#15
Lexus Test Driver
It's pretty rare for a consumer loan to have a pre-payment penalty like that.