Financing Car Situation. Advice Please - Page 2

Allegheny · ‎03-19-2010

I have purchased many cars over the years. Some cash, others financed thru my credit union. I have never heard of making your regular monthly payment and have it going strictly to the principal. But who knows what they do now.

I always paid extra on my monthy payment and any dollars above the regular payment was applied to the principal, but then again I was financing with a credit union.

That was until I purchased a Nissan and financed thru them. I did get 0% financing. When I made my monthly payment, if I sent in more dollars they applied it to the next month's payment, then my payment schedule got screwed up. IE: If monthly payment was $400 and I sent $600 the next month's payment was reduced to $200. Very frustrating. There was a way to make additional monthly payments, but not on line. A separate check had to be sent in to a different address requesting it be applied.

beckyb1012 · ‎03-09-2010

@ciao_bella wrote:
As many have already stated, pay down on principle as soon as possible.

Just as a side note; I generally look or wait for the car manufacturer to promote a 0% interest rate.

Best feeling getting that amount. I got mine in January of this year for the 0% and after driving my last car for fifteen years that was a big selling point for me to bite the bullet and get a new SUV @ciao_bella

"Live frugally, but love extravagantly."

WenGirl42 · ‎07-05-2012

Mathematically, if you call for every extra payment and have it applied to the principal, you will accrue less interest and end up paying less overall. But practically, if you're going to pay off the whole thing in the next year, it won't make enough of a difference to be worth the time and effort. If you want to figure out how much the difference would be, there are loan payoff calculators online you can use.

patbz · ‎03-10-2010

Check with your bank or credit union and maybe you can transfer the loan (if you get better, more understandable terms).

pigletsmom · ‎11-21-2011

@bonnielu wrote:
@pigletsmom Main question. If I say it is going to principle as I want to do. At the end... everything paid... do I pay less over all? I have never been aware of my choices. Seems all kinds of dishonest... This was a BIG loan. If it does not matter I will leave it alone.

It is a Toyota so I cannot walk in and pay. And I cannot use a credit card. Toyota Credit.

I am usually pretty financially atune but this time I was dazzled by the car of my dreams. It is very smart LOL. Me not so.

@bonnielu Yes if you make extra principal payments you will pay less interest in the long run. The faster you pay it off the better. But basically your regular monthly payment is interest and principal because they rightfully want to make something off of you.

I would make the regular payment each month and then a separate principal payment and ask Toyota credit how you going about making sure that happens. I just want to make sure if you have say a 5 year loan and you pay it in 1 year you don't end up paying the interest for 5.

In other words if your monthly payment is $400 for 60 months total is 24000 which includes interest. . You DONT want to think oh I'll just give them $2000 a month and be done in a year because your interest would be less and would lower the 24000 total.

So dump money on the principal while making the mothly payment as well. Keep watching as the amount goes down and when you think you have enough to payoff the balance get a payoff amount from them and send it on in.

novamc1 · ‎07-02-2015

I've never needed a car loan, but it has always been my understanding that the worst place to finance a car is through a car dealership. Far better to deal with a bank or credit union.

Reportedly, dealers make more money off of the car loans than they do by selling cars, and I've always been pressured upfront as to how I'm going to pay for the car. They have all kinds of financing tricks to make sure they maximize their proceeds on the loan.

Seems like a good idea to keep them guessing until I've made a final decision to purchase.

The salesperson's goal is to sign you up for a loan. My goal is to get the car for the lowest price. I don't want the salesperson to know that I'm about to rob him of some of his commission--and the dealership of some interest payments-- by using some other money source to pay for the car.

151949 · ‎03-09-2010

Any loan , car, mortgage , whatever, they take the interest out first. So the first about 1/3 of the loan is primarily interest paid, second 1/3 is a more equal division between interest & principle and the final 1/3 is mostly principle. This way, if you pay off the loan early they get their profit anyway. I very seriously doubt they would allow you to make principle only payments on a car loan. I think you misunderstood. They only make money on your interest payments. However, any extra you are paying can be applied only to principle.

novamc1 · ‎07-02-2015

Principal vs. principle..........

Principal, which refers to loans and mortgages, is the percentage of a monthly payment that reduces the amount owed in a loan or mortgage, without interest.

An honest borrower eventually pays off the total principal as a matter of moral and legal "principle".

It's true that it saves significant interest money over the life of the loan to get the principal paid down as soon as possible..It's also true that whether it's a car loan or a home mortgage, you have to stay on top of making sure the lender applies any early principal payments correctly and fairly.

This is not always easy but worth pursuing relentlessly with the lender's staff members who handle these things.

Early payoff penalties are probably rare these days in home mortgages, but I don't know whether they exist in car loans. Pays to find out what the loan documents say.

Tinkrbl44 · ‎08-23-2010

@bonnielu wrote:
Bought car. Financed it through car dealership. Attempting to pay up quickly (hopefully). Seems payment is divided by principle and interest. When I pay, the payment does not go to principle entirely. Something looked really strange in the arrangement so I called thinking ALL WAS WELL. Turns out that I can have a choice (one I was never told up front) to designate the entire payment go directly to principle. IN any case I plan to pay the total within a year (if possible) I have been saving furiously.

Those of you who have financed a car. Have do you have any advice. Should I just pay principle (have to call on the phone after the payment reaches them) or should I leave it all alone and let it run its course. Very confusing. I called three representatives and they are not all that helpful.

@bonnielu

Sorry, but if you plan to finance something ... anything ..... .... home, car, whatever .... it's up to YOU to get up to speed on different financing options. If you can't be bothered to do so, it's really not their fault, it's yours. You can't expect any financier to anticipate what questions you might have a year from now.

Not sure why you have suddenly decided to pay this off asap .... why not just save in advance if you want to pay cash? (JMO) Nevertheless, financing is a convenience when making large purchaces, and can be tax write off in some instances.

Since interest rates and options vary dramatically, you need to do your research in advance. Next time, consider going to your bank or credit union and get pre-qualified in advance of an automobile purchase. Then, there'll be no surprises.

Tinkrbl44 · ‎08-23-2010

@novamc1 wrote:
I've never needed a car loan, but it has always been my understanding that the worst place to finance a car is through a car dealership. Far better to deal with a bank or credit union.

Reportedly, dealers make more money off of the car loans than they do by selling cars, and I've always been pressured upfront as to how I'm going to pay for the car. They have all kinds of financing tricks to make sure they maximize their proceeds on the loan.

Seems like a good idea to keep them guessing until I've made a final decision to purchase.

The salesperson's goal is to sign you up for a loan. My goal is to get the car for the lowest price. I don't want the salesperson to know that I'm about to rob him of some of his commission--and the dealership of some interest payments-- by using some other money source to pay for the car.