Should I refinance my car loan immediately?
April 20, 2013 1:37 PM Subscribe
At the car dealership today, they ran my Equifax credit rating and I have an 815, they then offered me a Zero-to-Sixty simple-interest loan for USD$9000 with a rate of 5.04%. Should I refinance with another company?
I just get the feeling that if I have such a high Equifax score, I should be able to get a much lower APR. Am I wrong, or is this about right for such "small" loans? Are there penalties or fees involved with refinancing? Any web links would be helpful, thank you.
I just get the feeling that if I have such a high Equifax score, I should be able to get a much lower APR. Am I wrong, or is this about right for such "small" loans? Are there penalties or fees involved with refinancing? Any web links would be helpful, thank you.
screw the bank, CREDIT UNION!
posted by raildr at 1:46 PM on April 20, 2013 [7 favorites]
posted by raildr at 1:46 PM on April 20, 2013 [7 favorites]
With that credit score, you should definitely be able to get a much lower APR (I got a 2.0% with a similar score last year). Most banks and credit unions publish their current auto loan and refi rates, and with that credit score you should definitely shop around for the best possible rate.
posted by erst at 1:49 PM on April 20, 2013 [1 favorite]
posted by erst at 1:49 PM on April 20, 2013 [1 favorite]
With great credit, my last two cars were financed at 0.1% and 1.9%. You can do better. But what's this about refinancing? You didn't take that loan, did you?
posted by BlahLaLa at 1:51 PM on April 20, 2013
posted by BlahLaLa at 1:51 PM on April 20, 2013
According to Yahoo Autos, the average APR for a 60 month used car loan for a person in the US with a credit score from 720-850 is 4.18%.
And that's for everyone. I don't see why someone with a terrific credit score would settle for a rate 20% above the national average for all buyers.
posted by DirtyOldTown at 2:11 PM on April 20, 2013
And that's for everyone. I don't see why someone with a terrific credit score would settle for a rate 20% above the national average for all buyers.
posted by DirtyOldTown at 2:11 PM on April 20, 2013
My credit score was 804 when I opened up an account with a local credit union about 8 months ago, and they told me that would qualify me for the lowest rate on a car loan if I needed one. Just checked their website and it's currently at 2.49%. Get thee to a credit union!
posted by jabes at 2:15 PM on April 20, 2013
posted by jabes at 2:15 PM on April 20, 2013
With that credit score, I would be surprised if your bank or credit union couldn't do better.
Also, the way to prevent this in the future is by securing your loan ahead of time, with the bank you want. The dealer will say, "How do you want to pay?" And you'll say, "Cash. I'm financing this with my credit union." And then the dealer will say, "What rate are you getting?" And you'll say "2.5%" or whatever the rate is, and the dealer may very well try to beat it.
This is good advice. When I bought my first car, I financed it through my credit union. I had everything worked out ahead of time, and when this part of the conversation came up, it was over in a heartbeat. The guy asked me what my CU was giving me, I told him, and he immediately said he couldn't beat it. We moved on.
posted by secret about box at 2:16 PM on April 20, 2013
Also, the way to prevent this in the future is by securing your loan ahead of time, with the bank you want. The dealer will say, "How do you want to pay?" And you'll say, "Cash. I'm financing this with my credit union." And then the dealer will say, "What rate are you getting?" And you'll say "2.5%" or whatever the rate is, and the dealer may very well try to beat it.
This is good advice. When I bought my first car, I financed it through my credit union. I had everything worked out ahead of time, and when this part of the conversation came up, it was over in a heartbeat. The guy asked me what my CU was giving me, I told him, and he immediately said he couldn't beat it. We moved on.
posted by secret about box at 2:16 PM on April 20, 2013
Yeah. The rule is, never, ever set foot on a car dealer's lot unless you have financing already secured from your bank (or better, yet, your credit union.) Tell them as soon as the financing question comes up "I have financing in place already, but you're welcome to try to beat my bank's rate of x% for a y-month loan. If they can, you win. If they can't, you still win.
posted by deadmessenger at 2:38 PM on April 20, 2013
posted by deadmessenger at 2:38 PM on April 20, 2013
Sometimes you can get a better price on the car if you agree to take the dealer's financing. As long as there's no prepayment penalty you don't lose much by taking the loan and immediately refinancing.
posted by payoto at 2:49 PM on April 20, 2013
posted by payoto at 2:49 PM on April 20, 2013
That rate is probably too high, sure ... but could be fair if you are putting up a low downpayment and buying a car sitting on a pretty steep part of its depreciation curve, a rate like that would be expected regardless of FICO. If you shop away make sure that you are asking for the same down payment and same car.
posted by MattD at 2:51 PM on April 20, 2013
posted by MattD at 2:51 PM on April 20, 2013
We were just at AAA yesterday and they had their rates for car loans posted - 1.74%. With an 800+ credit score, I'd assume you'd qualify.
posted by jshort at 2:57 PM on April 20, 2013
posted by jshort at 2:57 PM on April 20, 2013
Seconding MoonOrb's suggestion of PenFed. You should definitely be able to get their lowest 1.74% APR with that credit score. You can do the application online and they will mail you the check once approved. I have my loan there at 1.49%, which was their lowest rate a few months ago, and I couldn't be happier.
posted by thewildgreen at 3:04 PM on April 20, 2013
posted by thewildgreen at 3:04 PM on April 20, 2013
Yes, we have immediately refinanced a car under a similar circumstance. I don't have credit anywhere near that and we are paying 0% and 2.49%.
posted by getawaysticks at 4:28 PM on April 20, 2013
posted by getawaysticks at 4:28 PM on April 20, 2013
Response by poster: We did the worst possible thing ---- walked into the dealership without securing the financing first. As a result, we experienced what MoonOrb described above ---- "Hey shipbreaker, you've got great credit! And so, we can offer you a loan at 5.04 percent!"
This also left us unable to negotiate / haggle the price downwards. In every bit of advice we received from friends and relatives before going out to the dealership, they said "Make sure you negotiate on the price!" but the fact that we were trying to secure financing AT THE DEALERSHIP left us with no negotiating leverage to get the price of the vehicle down.
=== === ===
Without being too sour grapes about it, I am just wondering if I can immediately go to another bank or a credit union or AAA or something, hell, even my own Uncle Mark, to get the money to immediately blow the old loan out of the water.
I get the feeling that the answer is "no" and that once I've signed a lot of forms at the dealership, no matter what bank and what APR and however many months we choose to pay off the loan, our $9000-plus-interest-at-5.04percent has been fixed in stone, we'll have to pay it, and it's too late now. If anyone can think of a way out of our predicament, please let me know.
=== === ===
posted by shipbreaker at 4:55 PM on April 20, 2013
This also left us unable to negotiate / haggle the price downwards. In every bit of advice we received from friends and relatives before going out to the dealership, they said "Make sure you negotiate on the price!" but the fact that we were trying to secure financing AT THE DEALERSHIP left us with no negotiating leverage to get the price of the vehicle down.
=== === ===
Without being too sour grapes about it, I am just wondering if I can immediately go to another bank or a credit union or AAA or something, hell, even my own Uncle Mark, to get the money to immediately blow the old loan out of the water.
I get the feeling that the answer is "no" and that once I've signed a lot of forms at the dealership, no matter what bank and what APR and however many months we choose to pay off the loan, our $9000-plus-interest-at-5.04percent has been fixed in stone, we'll have to pay it, and it's too late now. If anyone can think of a way out of our predicament, please let me know.
=== === ===
posted by shipbreaker at 4:55 PM on April 20, 2013
Why do you "get the feeling"? This isn't based on feelings it's based on your agreement with the car dealership which probably allows you to fully pay off the car today if you wanted to and could afford it. As that's likely the case you would secure financing through other means (other bank, credit union, Uncle Mark), that person pays off your car loan in full for you, and you now owe money under the terms of the new loan instead of the old. That's all refinancing is.
posted by Green With You at 5:03 PM on April 20, 2013
posted by Green With You at 5:03 PM on April 20, 2013
Response by poster: Why do you "get the feeling"? This isn't based on feelings it's based on your agreement with the car dealership which probably allows you to fully pay off the car today if you wanted to and could afford it. As that's likely the case you would secure financing through other means (other bank, credit union, Uncle Mark), that person pays off your car loan in full for you, and you now owe money under the terms of the new loan instead of the old. That's all refinancing is.
I do have an Uncle Mark, he would say to me "Did you need $9000 to buy a car? You should have just asked me! I'd be happy to lend it to you, at no interest until you can pay me back."
=== ===
But now that I've signed all the paperwork at the dealership, I'll be making a bunch of $185 payments to "SUNTRUST BANK" every month for the next 60 months, from a payment coupon booklet.
I am just fantasizing about asking Uncle Mark to lend me the money instead, and that by some act of Finance that I don't quite understand, we could pay off the Principal of the loan all at once with one financial blast, I wouldn't have to make payments to SUNTRUST BANK anymore, and I could repay Uncle Mark when I get around to it.
posted by shipbreaker at 5:17 PM on April 20, 2013
I do have an Uncle Mark, he would say to me "Did you need $9000 to buy a car? You should have just asked me! I'd be happy to lend it to you, at no interest until you can pay me back."
=== ===
But now that I've signed all the paperwork at the dealership, I'll be making a bunch of $185 payments to "SUNTRUST BANK" every month for the next 60 months, from a payment coupon booklet.
I am just fantasizing about asking Uncle Mark to lend me the money instead, and that by some act of Finance that I don't quite understand, we could pay off the Principal of the loan all at once with one financial blast, I wouldn't have to make payments to SUNTRUST BANK anymore, and I could repay Uncle Mark when I get around to it.
posted by shipbreaker at 5:17 PM on April 20, 2013
Response by poster: I am also assuming that there is some sneaky "Financial Services" trick in place, and that whereas this morning I had an incredible Equifax/FICO score of 815 and the car dealership said "Great score, shipbreaker, how does 5.04 percent sound to you????", if I go to WELLS FARGO on Monday morning as soon as the bank opens and ask about refinancing options, they will somehow pull up a score of 480 and say "Oh, I'm sorry mister shipbreaker, it seems to us that you owe all of your future earnings to the SUNTRUST BANK, and we cannot help you at all, no, sorry, we cannot offer you any better rate than the one you currently have."
=== === ===
And then I would raise my fist to the heavens and wail, pointlessly and to no avail, that I had only screwed myself by not going to a credit union or AAA or Uncle Mark first.
posted by shipbreaker at 5:29 PM on April 20, 2013
=== === ===
And then I would raise my fist to the heavens and wail, pointlessly and to no avail, that I had only screwed myself by not going to a credit union or AAA or Uncle Mark first.
posted by shipbreaker at 5:29 PM on April 20, 2013
When you get bored of daydreaming, read your paperwork and check for whether there's a prepayment penalty or how much.
posted by Salamandrous at 5:44 PM on April 20, 2013 [5 favorites]
posted by Salamandrous at 5:44 PM on April 20, 2013 [5 favorites]
My credit union lets me refi-autoloans at no cost 30 days from purchase. See if your bank will do the same. Sure you will take another ding on your credit report but more then likely will be worth it. 5.09 for a 800+ credit score is robbery and obviously kick back city.
posted by couchdive at 5:53 PM on April 20, 2013
posted by couchdive at 5:53 PM on April 20, 2013
shipbreaker, first let me tell you that you can definitely refinance your existing Suntrust loan and get a new loan with new terms (length of loan, APR). The new loan provider will pay off your existing loan (principal balance and any currently accrued interest for the month) and you start paying the new loan payments. It is quite easy & simple. There might or might not be a prepayment penalty based on your existing loan terms -- just check your paperwork.
You can find out your savings from a potential refinance by using this online calculator.
It looks like the following resources might be helpful for you:
PenFed refinance rates
UFCU Wheels 101 guide
Auto refinancing explained
Credit karma (free online credit score tool; no "hard" credit pull, so it won't affect your credit score)
posted by thewildgreen at 6:05 PM on April 20, 2013
You can find out your savings from a potential refinance by using this online calculator.
It looks like the following resources might be helpful for you:
PenFed refinance rates
UFCU Wheels 101 guide
Auto refinancing explained
Credit karma (free online credit score tool; no "hard" credit pull, so it won't affect your credit score)
posted by thewildgreen at 6:05 PM on April 20, 2013
Best answer: I am just fantasizing about asking Uncle Mark to lend me the money instead, and that by some act of Finance that I don't quite understand, we could pay off the Principal of the loan all at once with one financial blast, I wouldn't have to make payments to SUNTRUST BANK anymore, and I could repay Uncle Mark when I get around to it.
The act of Finance is that Uncle Mark writes a check for $9,000 to SUNTRUST BANK and pays off your loan, in full. Then you pay him back when you can. Seriously, that's it.
posted by (Over) Thinking at 8:47 AM on April 21, 2013
The act of Finance is that Uncle Mark writes a check for $9,000 to SUNTRUST BANK and pays off your loan, in full. Then you pay him back when you can. Seriously, that's it.
posted by (Over) Thinking at 8:47 AM on April 21, 2013
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posted by zippy at 1:42 PM on April 20, 2013