riceboy22

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.

LeXusIS714

Financed my with capital one last month for 6.05 for 60 months. Some member on board got 5.99 through LExus. SO i think your rate is pretty high.

#1gs300

iTrader: (4)

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.

lechuck4lf

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.

RyanDe680

Check your local credit union as sometimes they offer more competitive rates

flyfl1pguy

iTrader: (2)

6.9% is a little bit above average, but I've seen people buy car with a rate of 10.0% or higher.

I asked my credit union about going back and gettinga lower and they said no. Once you pick your monthly terms they have a set apr. They gave us 3 choices with 2 different apr on them. We chose the right one for us. NOt too sure about getting lower rate when you want to pay off car the next day.




Eh, I say just pay it off if you have the cash. You don't have to worry abou t payments.

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.

IS350ISFUN

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

lirandy

iTrader: (2)

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.

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.

ahohnstein

good advice. I'll second that. I don't think you can blanketly say that it's a good idea to pay off the loan with cash when we don't know if it'll decimate your savings. Carrying the payment, I'd say, is prefereable than putting yourself in a position to not be able to make a payment on a house note... or losing the house because you paid off a car... then having to declare bankruptcy... and losing the car... and then being stuck with the payment to the bank on a house you don't own cuz they sold it on the cheap at a foreclosure auction (mortgages are ?secured? debt. you can't get out of it thru bankruptcy, but I believe car loans are unsecured. someone correct me if I'm wrong). So... depending on your liqudity, I'd suggest thinking about how much risk you're willing to take and then determining whether or not 2 percentage points is worth it to you. Personally, I don't think it's all that much in the grand scheme of things but I'm sure there are a lot of people out there that will say I'm nuts (and coindicentally sound just like my wife )

LexFather

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.

VitB6

Lex you should know that you cannot make a blanket statement that financing is always better than leasing unless you have to trade in your car every 2 years. First you don't HAVE to own a 30-45K car in the first palce. Buy a Civic. Secondly leasing has plenty of advantages just like financing has advantages. Blanket statements should be avoided because there is no one better way.


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.

Kermee

iTrader: (1)

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

Kermee

iTrader: (1)

OT but liquid cash (i.e. cash in savings accounts) to hold for "emergency" purposes is generally a bad idea for people who have decent lines of revolving credit. Savings should always be applied towards debt or invested for capital growth after you save enough to pay mortgages and bills for 6 months in the event you lose your job or something worse.

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