AUTO REFINANCING
|
| When does auto refinancing make
sense? If you bought your car from a dealer, chances are
that the specific APR of your auto loan was never part of
the negotiation. Car salesmen are very good at keeping the
money focused on the amount of your monthly payment. Chances
are also good that the salesman brought up some "minor"
credit problem that he was able to "solve" for you at great
difficulty to get your loan approved. If this sounds
familiar then auto refinancing may keep hundreds or even
thousands of your dollars in your own pocket instead of the
car dealer and the bank. |
You may be buying a $20,000 car with 15% financing but the dealer is really
selling a $28,500 installment note. Car dealers show cars but they make their
money from the paper they sell to finance them. That is their real business, and
the reason they keep the money talk on the monthly payment amount.
The first thing to check is your loan documents. If the
APR on your auto loan is more than 1% higher than you what
you could get today it
may be worth your while to run the numbers. BMW Bank also refinances lease buyouts.
Here are some examples of the impact of a few percentage
points on the monthly payment for a $20,000 auto loan:
|
|
36 months |
48 months |
60 months |
|
15% |
693.31 |
556.51 |
475.80 |
|
12% |
664.29 |
526.68 |
444.89 |
|
9% |
635.99 |
497.70 |
415.17 |
|
6% |
608.44 |
469.70 |
386.66 |
MONTHLY PAYMENT
Here is the same table showing total interest paid for
the full life of the auto loan. This is the number the car
dealer is looking at.
| |
36 months |
48 months |
60 months |
| 15% |
4,959 |
6,717 |
8,548 |
| 12% |
3,914 |
5,281 |
6,693 |
| 9% |
2,896 |
3,889 |
4,910 |
| 6% |
1,904 |
2,546 |
3,199 |
TOTAL INTEREST PAID
Check for prepayment penalties from your current lender.
If your auto loan documents .contain anything about the Rule
of 78, or pre-computed interest, or interest rebates then
contact the lender and get an exact pay-off amount. The
amount you could save refinancing may not be enough to
overcome the hit you will get from the prepayment penalty.
Rule of 78 loans are prohibited in 17 states but they do
exist.
Requirements differ among lenders but generally you can
refinance passenger cars 1996 or newer with less than 80,000
miles. You have to refinance an existing loan. Auto
refinancing lenders will not do cash out loans.
Start
refinancing your current car loan.
|
