I’m new to Lexus financial and financing for the first time. On the Lexus financial website, I see where I can make the one time/recurring payment for the amount due each month. I was planning to just pay more than the monthly each month BUT then I see the “Make principal payment only” button. I am confused how this works now. Do I pay the monthly fixed payment that I signed for and then pay with the make principal payment only? Am I allowed to make multiple payments a month like that?

The goal is finish these payments before the actual terms that I agreed to when I bought the Lexus to reduce the total interest I pay throughout the loan. Please help me understand how to make these payments properly.

 

I don't have a definitive answer for you as I have only used Lexus Financial for low interest financing specials, with no incentive to payoff early. However, your situation looks similar to when I was paying off my mortgage years ago. It looks like if you just make a larger payment or multiple payments, the overage just gets applied to the next payment(s) due, with no immediate principal reduction (and no interest savings) for the additional amounts. It appears that to get immediate principal credit, with interest savings, you have to make a separate payment and designate the extra amount as a principal payment.

 

On a loan where you have the same monthly payment each month, a portion of that payment goes to interest and a portion of the payment goes to principal. At the beginning of the loan, typically, most of the payment would be interest; at the end of the loan, most of the payment would be principal.

I haven't seen the Lexus Financial website, but my guess is that if you are setting up auto payments, you can only do it for the actual monthly payment amount. Then, monthly or however frequently you wanted, you could go back and make an "extra" payment -- that payment would be a reduction of the principal balance only, based on what you are saying. Which means that, if you do that regularly, your loan will be paid off prior to the stated maturity date, and you would end up reducing your interest payments, as you desire.

Alternatively, your bank may allow you to schedule a regular monthly payment in whatever amount you set, to be sent out from the bank to Lexus Financial. So if you did that, you could just program your "extra" payments into your normal monthly payments, again, with the result of paying off the loan early and saving interest.

 

On Lexus Financial, you can pay as much as you want ("custom amount") on a single payment, but if you do that, the extra over the payment due will be applied to the next month's payment, not to principal. If you want to do a principal only payment, you first make your regular payment, then go in to the principle only payment and make a separate payment for that.