Auto Loan Financing Question
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Driver School Candidate
Joined: Jul 2006
Posts: 23
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From: NJ
Auto Loan Financing Question
Now that the initial excitement of getting a new car has started to wear off (at least until I get through the break-in period 
), I was hoping to get some advice and comments from you all on financing.
We (my wife and I) financed our car for 6.9% on a five-year loan, but now I'm beginning to wonder if I should have tried to get a lower rate or maybe just paid for the thing in cash. Well technically we had to go through LFS to turn in her leased IS300 early, but my questions are:
1. Is this a good rate?
2. Can I go back now and try to get a lower rate? We bought the car about a week ago. I know my parents recently purchased an RX350 with financing, and when they went in to pay off the whole loan the next day, they were immediately offered a lower rate. Is this common practice? Advice on doing this and what I should ask for?
3. Does it make more sense to just pay off the whole thing in cash if you have the $$? FYI HSBCDIRECT is paying 5.05% on savings accounts now which is what I'm using as a reference point. Paying off the car in full would be a fair chunk of savings but not a crippling amount.
Thanks for any advice you can provide.
), I was hoping to get some advice and comments from you all on financing. We (my wife and I) financed our car for 6.9% on a five-year loan, but now I'm beginning to wonder if I should have tried to get a lower rate or maybe just paid for the thing in cash. Well technically we had to go through LFS to turn in her leased IS300 early, but my questions are:
1. Is this a good rate?
2. Can I go back now and try to get a lower rate? We bought the car about a week ago. I know my parents recently purchased an RX350 with financing, and when they went in to pay off the whole loan the next day, they were immediately offered a lower rate. Is this common practice? Advice on doing this and what I should ask for?
3. Does it make more sense to just pay off the whole thing in cash if you have the $$? FYI HSBCDIRECT is paying 5.05% on savings accounts now which is what I'm using as a reference point. Paying off the car in full would be a fair chunk of savings but not a crippling amount.
Thanks for any advice you can provide.
I agree the rate is high. I bought my 98 gs300 in 2001 and i paid 6.5% on a used car then a year later i got a 5.5% 48 month loan, Just last year i got my girl a 2002 altima for 4.99% used. So yuor new car man i think they seen u coming threw the door, or unless ur credit is jacked up.
Rookie
Joined: Jun 2006
Posts: 52
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From: Orange County
I am a first time auto buyer and Lexus wanted to give me 7.25% and I laughed at them. I have great credit and went to E1 financial and got 6.00%. From my knowledge of auto loans, they differ from mortgage loans in the fact that it does not cost you anything to refinance.
Originally Posted by riceboy22
We (my wife and I) financed our car for 6.9% on a five-year loan, but now I'm beginning to wonder if I should have tried to get a lower rate or maybe just paid for the thing in cash. Well technically we had to go through LFS to turn in her leased IS300 early, but my questions are:
1. Is this a good rate?
1. Is this a good rate?
Originally Posted by riceboy22
2. Can I go back now and try to get a lower rate? We bought the car about a week ago. I know my parents recently purchased an RX350 with financing, and when they went in to pay off the whole loan the next day, they were immediately offered a lower rate. Is this common practice? Advice on doing this and what I should ask for?
Originally Posted by riceboy22
3. Does it make more sense to just pay off the whole thing in cash if you have the $$? FYI HSBCDIRECT is paying 5.05% on savings accounts now which is what I'm using as a reference point. Paying off the car in full would be a fair chunk of savings but not a crippling amount.
Thanks for any advice you can provide.
Eh, I say just pay it off if you have the cash. You don't have to worry abou t payments.
Driver
Joined: Mar 2006
Posts: 187
Likes: 0
From: HI
If you have cash and will still have a healthy reserve even after you pay for your car, then go for it! Pay for it in cash!
Just look at your comparison, if you're only making around 5% on your savings, which is a great rate by the way, you're still losing money since you'll be paying 2% higher on your loan.
A good reserve usually is at least 6 months worth of your monthly income or whatever it is you spend monthly. Of course, the more you have saved the better just in case you lose your job so you'll have some time to look for a new one.
Just look at your comparison, if you're only making around 5% on your savings, which is a great rate by the way, you're still losing money since you'll be paying 2% higher on your loan.
A good reserve usually is at least 6 months worth of your monthly income or whatever it is you spend monthly. Of course, the more you have saved the better just in case you lose your job so you'll have some time to look for a new one.
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Driver
Joined: Oct 2005
Posts: 161
Likes: 0
From: CA
If you guys haven't notice finance has been going up ever since last year....6.9% from LFS is there buy rate. LFS & TFS, they don't offer any refinancing program....But you can always try credit unions or smaller banks for alittle better rates
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You just bought the car a week ago. IMO I think it's a not bad rate since the prime rate has been raising for a while. If I were you, I would rather keep the cash in bank or whatover investment and never put that much cash in something that is going to depreciate quick.
Lexus Test Driver
Joined: May 2006
Posts: 1,155
Likes: 7
From: TX
Everybody has advice, so make your own decision.
But if were me, I would NOT pull down savings to pay off the loan. You may have an unforeseen emergency of some kind and regret doing that.
But financing for 60 months is also not a good plan in general. You end up paying a lot of interest, and if you want to trade before then you'll be "upside-down" (you'll owe more than your car is worth).
IMO, your best bet would have been to lease, since your payments would have been a good 40% less than buying for the same period, and there would be no trade-in value hassles at the end.
You could still lease the car from an independent leasing company or bank if you want to. Re-financing might also be an option if you don't want to lease.
But if were me, I would NOT pull down savings to pay off the loan. You may have an unforeseen emergency of some kind and regret doing that.
But financing for 60 months is also not a good plan in general. You end up paying a lot of interest, and if you want to trade before then you'll be "upside-down" (you'll owe more than your car is worth).
IMO, your best bet would have been to lease, since your payments would have been a good 40% less than buying for the same period, and there would be no trade-in value hassles at the end.
You could still lease the car from an independent leasing company or bank if you want to. Re-financing might also be an option if you don't want to lease.
Intermediate
Joined: Dec 2005
Posts: 287
Likes: 2
From: GA
Originally Posted by acsan
If you have cash and will still have a healthy reserve even after you pay for your car, then go for it! Pay for it in cash!
Just look at your comparison, if you're only making around 5% on your savings, which is a great rate by the way, you're still losing money since you'll be paying 2% higher on your loan.
A good reserve usually is at least 6 months worth of your monthly income or whatever it is you spend monthly. Of course, the more you have saved the better just in case you lose your job so you'll have some time to look for a new one.
Just look at your comparison, if you're only making around 5% on your savings, which is a great rate by the way, you're still losing money since you'll be paying 2% higher on your loan.
A good reserve usually is at least 6 months worth of your monthly income or whatever it is you spend monthly. Of course, the more you have saved the better just in case you lose your job so you'll have some time to look for a new one.
)
Guest
Posts: n/a
Originally Posted by Mike_TX
Everybody has advice, so make your own decision.
But if were me, I would NOT pull down savings to pay off the loan. You may have an unforeseen emergency of some kind and regret doing that.
But financing for 60 months is also not a good plan in general. You end up paying a lot of interest, and if you want to trade before then you'll be "upside-down" (you'll owe more than your car is worth).
IMO, your best bet would have been to lease, since your payments would have been a good 40% less than buying for the same period, and there would be no trade-in value hassles at the end.
You could still lease the car from an independent leasing company or bank if you want to. Re-financing might also be an option if you don't want to lease.
But if were me, I would NOT pull down savings to pay off the loan. You may have an unforeseen emergency of some kind and regret doing that.
But financing for 60 months is also not a good plan in general. You end up paying a lot of interest, and if you want to trade before then you'll be "upside-down" (you'll owe more than your car is worth).
IMO, your best bet would have been to lease, since your payments would have been a good 40% less than buying for the same period, and there would be no trade-in value hassles at the end.
You could still lease the car from an independent leasing company or bank if you want to. Re-financing might also be an option if you don't want to lease.
Interest rates are going up as well.
What you can do is pay on time every month for a year and renegotiate or switch finance companies, they are in hot competiton to get your business.
Pole Position
Joined: Sep 2005
Posts: 215
Likes: 0
From: kjhklh
Originally Posted by 1SICKLEX
Leasing is renting, I cannot recommend leasing over owning unless you HAVE to trade cars every 2 years and you dont mod or drive much.
Interest rates are going up as well.
What you can do is pay on time every month for a year and renegotiate or switch finance companies, they are in hot competiton to get your business.
Interest rates are going up as well.
What you can do is pay on time every month for a year and renegotiate or switch finance companies, they are in hot competiton to get your business.
Secondly, the interest rate of the OP is fine. Rates have jumped tremndously over the last year, so not sure why people are comparing his rate to one that they got 6 months ago or from back when they bought their "girl" a car in 2001.
Honestly, 6.9% isn't that bad. It still means you have very good credit. The U.S. just went through another fed rate hike towards the end of last month and the prime rate is now 8.25% so take that into account when you compare rates from this month vs. last month.
In the end, you should see how much the financing actually costs you and less about the actual APR you got. (On top of the obvious if you can afford the monthly payments).
* At 6.9% on a $30,000 car loan over 5 years/60 months, you pay approximately $5,557.29 in interest.
* At 6.0% on a $30,000 car loan over 5 years/60 months, you pay approximately $4,799.04 in interest. That's a difference of about $760 over a 60 months, or about $12.50/month.
If you did a one-time payment of $2,000 against the principal of your $30,000 loan on your second payment due on the 6.9% example above, you would change your $5,557.29 in finance charges to $4,782.14 which is comparable to the 6.0% APR example AND shave off 4 months of payments.
Hope I've thoroughly confused everyone even more.
Cheers,
Kermee
In the end, you should see how much the financing actually costs you and less about the actual APR you got. (On top of the obvious if you can afford the monthly payments).
* At 6.9% on a $30,000 car loan over 5 years/60 months, you pay approximately $5,557.29 in interest.
* At 6.0% on a $30,000 car loan over 5 years/60 months, you pay approximately $4,799.04 in interest. That's a difference of about $760 over a 60 months, or about $12.50/month.
If you did a one-time payment of $2,000 against the principal of your $30,000 loan on your second payment due on the 6.9% example above, you would change your $5,557.29 in finance charges to $4,782.14 which is comparable to the 6.0% APR example AND shave off 4 months of payments.
Hope I've thoroughly confused everyone even more.
Cheers,
Kermee
Originally Posted by Mike_TX
...
But if were me, I would NOT pull down savings to pay off the loan. You may have an unforeseen emergency of some kind and regret doing that.
...
But if were me, I would NOT pull down savings to pay off the loan. You may have an unforeseen emergency of some kind and regret doing that.
...
Use credit cards for emergencies.
I wouldn't pull savings to pay off the loan for another reason and if I were to make an assumption, if your credit history is short (e.g. less than 8 years), keeping this installment loan and paying it on time, etc. will help your credit rating. And installment loans do a lot less damage to your credit score than revolving debt (e.g. credit cards).
Cheers,
Kermee