I just joined a credit union at my new job. Since I have recently refinanced my house I looked to see what the interest rates would be on my car.

I currently have a 4 year loan at 7.49% (yeah, thats the best they could do)

I have paid a little over one year on that loan.

My credit union is offering 3 year or under at 5.49%. Is this a good deal? Can I find better?

 

I would have to say yes. Your payments will be a little higher, but overall you will pay a lot less interest.

 

What? The payments get lower not higher with a smaller interest rate. Did I read you wrong?


Another question, what am I buying by refiancing?
THESE ARE NOT ACCURATE NUMBERS, JUST FOR COMPARISON

Is it refinancing the existing principal and interest or just the principal of the original loan to date? If I would have paid $10,000.00 principal and $1000.00 interest on my existing loan ($11,000.00 total)...

Am I now paying $11,000 principal and $500.00 interest ($11,500.00 total) by refinancing or am I paying $10,000.00 principal and $500.00 interest ($10,500.00 total) by refinancing?

In the long run do I pay more and lower payments or pay lower amount overall?

 

i paid off the loan with my 0% credit card and i just made the payments to them.. just make sure you pay off the balance before the promotional rate expires.. usually a year.. if not, transfer the balance to another promotion... another plus, is that you get your title after you pay off the loan with your CC.
it worked out great for me. saved me a few hundred dollars.

 

My bad. I missed the part where you said you've paid a year on the current loan. You need to get a 10 day payoff, then make your calculations. I don't think you're in to your loan far enough where it would not make sense to refinance at 2% lower.

 

It's a bit tough to put it into perspective since we don't know the loan balance amounts. Your finance account has a balance as of now (aka principal balance - which is usually slightly less than the payoff amount since you will be paying interest for those days between your last statement date and the date you actually pay-off your balance).

Either way - let's say this balance is $10,000. The cost of you borrowing this money for the remainder of your EXISTING loan (at 7.49%) is $1,196.00 (assuming you have 36 more months left). This is what you will be paying in interest over the remainder of the loan).

If you go with the lesser interest rate with your credit union (5.49%) the interest you will pay over the next 36 months is $868.90).

As you can see - regardless of how much you paid in the past etc - if you finance a certain amount over the same period of time - 36 months (since you said the present loan is 4 years and you've been making payments for a year) - you will be better off with a lower interest rate. If you need me to run the actual numbers - email or PM me with your payoff amount, # of months left on the current loan.

 

The payment is smaller, and the savings is not as much as you think. Let's assume: 25000 car with 20% down, so orig principal was 20k. Original pymt was $483/mo and after a year $4450 was paid towards principal. Now he goes and refinances for 36 mo.--his total time to pay has not changed. $1354 interest was paid on the original loan, and now at 5.49% for 36 mo the new pymt is $470/mo. Add the $1351 interest for the next 3 years and total interest paid is $2705 when compared to the original $3217. Savings is $512. Worth it? Sure. But why not make it really worth it by refinancing 24 months? The balance is 15550 so payments are $685 for 24 months, BUT another $450 is saved in interest. Add that $450 to the $512. Why you get ra*** in auto loans is that when you refinance the rate is HIGHER than for a used car. I'd say 5.1 to 5.3 is the going rate, 5.49 is not that far off.

Don't know what the dude's tax situation is but a home equity loan is another possiblility because the interest is low and deductible.

I have no idea where that other dude came up with 2% less or don't refinance, that's crazy. That was a rule when our great-grandparents were considering refinancing their homes. There are no closing costs on a car like you have with a home. Nowadays, 5/8% drop and people are looking into refi their homes. One reason is if they didn't put 10% down and are paying PMI, their homes may have appreciated so much in 1 yr. that a refi will show them to have a 79% LTV so adios PMI. In the old days people did not put less than 20% down, today people borrow till the cows come home. A tiny 150000 row home in Phila. can have over 8 grand in closing costs, of course there is a refi equation--if you're not staying put, don't refi. With a car it's simple--lower rate = refinance. Just use the refinance rate and good luck.

 

Yes. Can you find better? Prabably but it would be a long shot.

 

5.19% - 36mo from Peoplefirst.com