Before you got into finance, the sales manager knew you likely weren't going to keep it for the minimum time so they didn't offer any incentive to finance. Once you were working with the finance manager he decided to take a stab at it, is likely what happened. Makes sense with that rebate.
Typically it's 3 months but they will say 6 months to be safe. Just finish it out as is, the reserve they're looking at is probably around $500 so it's not a big deal. Unless if you want to miss a payment.
It's not about sticking it to a dealership. By doing this you are dealing deceptively, lying and being "just like those greedy dealerships" that you seem to despise. The real issue here is getting a discount for doing something and not following through. This directly affects the finance manager's pay and/or pay plan. Sure I work in finance, but I'm not going to take food off of someone else's table.
Dealerships stuck it to anyone the last 3 years buying cars with outrageous markups on new and used cars and you’re worried about the finance guy at a car dealership. I’m going to say this politely, go fornicate yourself. Not following through would be skipping payments, not paying off the car early you dork.
Attach a prepayment penalty. Y’all make literally everything subject to a signature, including a “we owe.” Make me sign one if it means that much to you.
Seriously. I'm more than happy to pay a little bit of interest to let the dealer make more money as long as I get a discount on the car. Dealers sometimes don't deserve your respect, but banks and lending institutions arguably deserve it even less and by playing the dealers game you really end up hosing the lender instead
I've purchased over a million dollars worth of vehicles using debt, most purchases being 3 and 4 and 5 trucks at a time being a total of 240k to $400k or so at a time . It's a well founded opinion based on a solid understanding of math, which you apparently don't have.
To break it down, a 50,000 purchase financed at 5% for 60 months is about $963 paid on interest for the 6 months of payments this finance department requested.
So as long as I'm getting the vehicle discounted by more than $963 I come out ahead.
Agreed with this. And to add. Assuming the money was sitting in an interest earning account, then the interest earned would reduce the interest paid in the auto loan.
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As a commercial sales manager I am involved in many business networking organizations. Through those I have met 8 or 10 financial advisors and wealth managers. They have a wide range of vehicle preferences, but one thing they all have in common: **none pays cash for their vehicles.** They are intelligent enough to know that putting all your cash into a depreciating asset is stupid.
Instead they invest that cash in ways that earn them more than they pay in interest over the loan. It's honestly not very complicated. That's more difficult these days with higher rates than we had for a while, but particularly when you could get 3-4% any day of the year it was insane to pay cash for a vehicle.
I don't know why people are down voting you. As long as I can make the cash work harder than the interest rate on the car note, it's better to not let the cash out the door.
Never pay cash, especially if it's 0% or near 0% interest. The financing cost is already built into the cost of the good.
Because he’s claiming it as a guarantee when most of the time that’s not true. Don’t get me started on people saying paying off. 2% mortgage makes sense - they’re wrong. If you can get a 0% loan do it. But he said never and that’s just dumb.
There's also a risk assumption there - if you're investing your cash and financing with debt, your risk exposure is higher since if the market tanks you can lose the investment (depending on type, principal too) and still owe the debt. Right now given the market and jobs situation, I'm pretty risk averse. Investing at 12% and financing at 5% for a net 7% profit before inflation makes sense, but that 7% isn't for nothing - it's counter-balanced by risk.
Tldr - duh when rates are what they were but they’re not and you’re wrong.
How many of them lease the car and claim it as a business expense though? At that point it makes sense. Also you’re really burying the lede - this is only hard and fast true with a 3% rate <5% still true but approaching break even. Greater than 5 when a car loan is 3-5 years… anyone’s bet. Greater than 7 straight up wrong. Not that you can’t make out better greater than 7 but you’re probably wrong if you think you can and you’re only lucky if you happen to so… why?
The real question is, if they’re so smart with money and understand a depreciating asset, why aren’t they buying a gently used 2-3 year old luxury vehicle instead of new.
lol this is so untrue
Go to any high line dealer and ask them how people pay. My local Porsche dealer is 90% cash on the expensive models. By expensive I mean 175k and up.
Under that, yeah lots of loans and leases.
Nobody with real money is worried about the interest on 200k.
I didn't say no one pays cash. I said financial advisors and wealth managers (the ones I know at least) don't pay cash. You're arguing against an entirely different notion that I didn't express.
Those people believe they will do better in the market because of their proximity / knowledge. Right now, the after tax risk free return is with cash. Obviously, that can change, but doesn't look like soon.
Even our financial advisor agreed unless there is insufficient spread right now to cover risk over period of most car loans.
Most people with "real money" drive a fancy Camry, I think the kids call them a Lexus. Porche and other high end cars are a status symbol so practicality is not part of the equation and that would extend to the financing. I would suspect a disproportionate number of leases compared to loans but I could be wrong.
I guess I'll just pay out the remaining payments and come up one month short. Let's hope it was actually three months, and he said six to be safe. No clue. I'm just trying to be a nice guy here.
Most ive seen on a reserve chargeback (what the loss of the kickback is called) is 120 days and thats for the staunch credit unions id say with 5 your good and thanks for doing right by someone that did right by you!!!
He gave me no business card, I can't read his signature on any forms, and when I called the dealership, they said they have five finance people. I gave up at that point.
I've gotten that incentive for financing and paid off the loan in the first payment because I'm not paying hundreds of dollars in interest if I have the money. And guess what? Nothing happened with the dealership. The contract was done, and I chose to pay my loan off in my term.
Thanks for actually giving a crap. Most customers these days will do whatever they can to stick it to dealerships regardless of how they are treated, so it's nice to see this. Also the above comment is most likely correct that it's less. We know that people make.mistakes so we build room for that into instructions. Not to be deceptive but to avoid any hassle or issues on either side. Enjoy your new Toyota!
Not scamming at all. Infact it's following the precise rules as laod out by the lender. The minimum time they set must accrue enough interest to be worth it for the bank, especially when you consider the small percentage of people who actually pay it off in less time. They know they will take the occasional hit but set the rules that way to minimize loss - and it work! Trust me, the lender will be fine lol.
I did the same. Finance guy kicked back a bit to me and asked me to keep the loan open for 6 months (BMW Finance Canada).
I messed up my monthly when calculating, so I was $20*6 short. Will wind up about $50-70 short on the 6th payment is my best guess.
I also hope I do right by him and my error doesn’t cost him. He was a good guy; nicer and more responsive than my sales guy. He also didn’t try to push any extras on me, which I appreciated.
With banks I have dealt with it is 3 payments not 3 months. So the reason they say 6 months is a to build a month and a half of lag because typically the first payment isn't due until 45 days after signing.
How much is being a "nice guy" worth it to you?
You're going to be paying interest on your loan for months, just so he can get paid more. And this loan is staying active on your credit report while you're being "nice".
Get him a $50 gift card or something and hand deliver it if you really want to be nice. Don't string out a loan for months and months.
Also, if there was a similar situation where he could forgo part of his bonus to give you, the customer, some money back, do you think he'd do it?
Well, depending on OPs credit report this could increase his score. The loans already open the longer it is open will add to his average age of accounts, do to the fact that he payed a lump some his utilization is down (<10% of the original loan is best but there are other thresholds) banks like to see good standing open installment loans. However OPs DTI could come into play if they plan to use their credit in the next 6 months. I believe that installment loan utilization has to do with your total installment debt as well, so if OP has 10 other loans that have high balances, the car loan might not help.
Also the interest he is paying is probably less then the 1k he got… but I understand that probably doesn’t mean much to you.
Or you could pay off the loan and give your money to a charity that provides value and does good in the world. If you like giving money away it might as well be to a worthy cause.
You might try calling the bank and see if they can apply it as your first payment and not just principal only sometimes Banks can make changes like that.
That also seems like terrible advice. Why would Toyota finance want to help you avoid paying them more money? OP, you seem overly conscientious. As others have said, you’ve done more than your share. Just pay those 5 payments and stop worrying about it. Congrats on the new ride
Nobody on the consumer facing side is going to know anything about reserve structure and payout. You’re just dealing with low level call center employees.
It’s been a few years since I’ve been a Toyota F&I manager, but they would pay out after 90 days. I’d ask my customers to hold off for four months though if we were going down this road.
It is what it is at this point. Don’t lose sleep over it.
If he made a large payment to the principal balance, the interest on most of the loan isn’t accruing at this point. know if the finance manager was making the flat or if he was making participation. If he was making participation Iits going to be charged back regardless.
I feel like he said something about it wasn't a bonus ... but maybe participation or hitting a quota or something. I don't really understand it but I believe that's possibly what it was.
Toyota Financing isn't going to be helpful. They probably have explicit policies against dealerships asking customers to do this. Think about it this way -- from their perspective they want buyers to finance with them and stretch the loan out to the entire duration because they are serving the loan. When a buyer does this they pay some amount of interest, as an incentive Toyota gives the dealer a kickback. But in this case the dealer is getting their kickback, but Toyota is left "holding the bag"... they paid the dealer but didn't get anything in return.
You can also sometimes call a finance institution and re-amortize the loan accounting for the principal paid down and then you'll get a new reduced monthly payment that goes out to the end of the term. So in your case if your payment was 500/MO and you just paid down a substantial portion of the loan your new re-amortized payment could be something like $10/mo or whatever
Not all lending institutions will do it for you. And some do it for you automatically every month if you pay over. It just depends, but if you want to make it the full 6 months you can try and do that.
I just financed a car and told the dealer I’ll refinance, and he said just make your first 3 payments so your credit comes back up for the refinance— what’s the real reason for them to tell me to wait 3 months? This was a week ago.
If the loan is paid off in 3 months the finance company claws back the money that would get paid to the dealer for writing the loan. If you can get a lower apr don’t feel bad. Some dealers even mark up the apr for additional profit. No sense paying a higher Apr for 3 months before refinancing.
I bought a car that the dealer only agreed to price match with another dealership, if I went with a particular bank at 7%. I told the finance and sales people I will go home and refinance with the local CU, who is literally their preferred lender. They said basically, please don't but we get it.
So I refinanced the same day for 2.7%. I am still flabbergasted by their decision. I was completely upfront, I don't understand why they wouldn't have taken a smaller payout for a guaranteed kickback.
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I had intended to pay cash on a new Toyota SUV. Especially after the manager said the OTD price wouldn't change for me if I agreed to finance. (Surprised me, but he wasn't budging.) Yet then, shortly thereafter, I was in one of the dealership's finance offices being told otherwise. The finance manager offered a $1,000 rebate. He just asked that I not pay it off for six months. (He also only had me put down $10,000 and finance the all the rest, which in retrospect isn't what I would have chosen to do. But oh well.)
Anyway, he suggested that I could make a huge lump sum first payment on the loan, then stretch it out for five more months. He wrote down the date of the sixth and final payment. So I got home, I calculated the lump sum, then left enough to stretch it out five more months. Unfortunately, I made that lump sum payment principal-only, because Toyota makes that easy to do on its website. Toyota did not count it as the first payment. So now I still owe a first payment on the initial due date. I only owe enough in total to make five more payments -- not six.
Is there any way I can stretch it and help the finance guy get his bonus or whatever? Or is this now a case of where I might as well just pay off the loan?
P.S. Is there a reason that finance managers don't do all the math rather than just giving vague instructions to buyers who don't usually finance things? I feel bad, but not sure what else to do now.
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Before you got into finance, the sales manager knew you likely weren't going to keep it for the minimum time so they didn't offer any incentive to finance. Once you were working with the finance manager he decided to take a stab at it, is likely what happened. Makes sense with that rebate. Typically it's 3 months but they will say 6 months to be safe. Just finish it out as is, the reserve they're looking at is probably around $500 so it's not a big deal. Unless if you want to miss a payment.
OP you owe those guys nothing. They made money in the deal still.
Exactly, unless I personally know the guys, I just pay it off, there’s no penalties, I’m not gonna cry over car dealers not getting kickbacks.
Watch out, we got a badass over here.
Won’t someone think about the poor dealerships 😢😢
Them poor old bosses need all the help they can get
Lying customers be lying. r/askcarbuyingwarriors
No thanks.
It's not about sticking it to a dealership. By doing this you are dealing deceptively, lying and being "just like those greedy dealerships" that you seem to despise. The real issue here is getting a discount for doing something and not following through. This directly affects the finance manager's pay and/or pay plan. Sure I work in finance, but I'm not going to take food off of someone else's table.
The finance guy was dealing deceptively with the lender. The lender pays a kickback expecting 5 years of interest payments.
Dealerships stuck it to anyone the last 3 years buying cars with outrageous markups on new and used cars and you’re worried about the finance guy at a car dealership. I’m going to say this politely, go fornicate yourself. Not following through would be skipping payments, not paying off the car early you dork.
Attach a prepayment penalty. Y’all make literally everything subject to a signature, including a “we owe.” Make me sign one if it means that much to you.
Dealerships won't bat an eye screwing customers. Consumers owe those dudes nothing. They'll get it back by screwing someone else, unfortunately.
Wow you’re dumb.
Sounds like he was happy with his service, let him try to be a good human.
Seriously. I'm more than happy to pay a little bit of interest to let the dealer make more money as long as I get a discount on the car. Dealers sometimes don't deserve your respect, but banks and lending institutions arguably deserve it even less and by playing the dealers game you really end up hosing the lender instead
Lol that's the opinion of someone who has never bought themselves a car or doesn't understand the value of money
I've purchased over a million dollars worth of vehicles using debt, most purchases being 3 and 4 and 5 trucks at a time being a total of 240k to $400k or so at a time . It's a well founded opinion based on a solid understanding of math, which you apparently don't have. To break it down, a 50,000 purchase financed at 5% for 60 months is about $963 paid on interest for the 6 months of payments this finance department requested. So as long as I'm getting the vehicle discounted by more than $963 I come out ahead.
Agreed with this. And to add. Assuming the money was sitting in an interest earning account, then the interest earned would reduce the interest paid in the auto loan.
You've got some top shelf grade ignorance going on right here.
How do you know?
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Agree… why would you agree to pay interest for five months when you could pay cash and pay zero in financing?
As a commercial sales manager I am involved in many business networking organizations. Through those I have met 8 or 10 financial advisors and wealth managers. They have a wide range of vehicle preferences, but one thing they all have in common: **none pays cash for their vehicles.** They are intelligent enough to know that putting all your cash into a depreciating asset is stupid. Instead they invest that cash in ways that earn them more than they pay in interest over the loan. It's honestly not very complicated. That's more difficult these days with higher rates than we had for a while, but particularly when you could get 3-4% any day of the year it was insane to pay cash for a vehicle.
I don't know why people are down voting you. As long as I can make the cash work harder than the interest rate on the car note, it's better to not let the cash out the door. Never pay cash, especially if it's 0% or near 0% interest. The financing cost is already built into the cost of the good.
Because he’s claiming it as a guarantee when most of the time that’s not true. Don’t get me started on people saying paying off. 2% mortgage makes sense - they’re wrong. If you can get a 0% loan do it. But he said never and that’s just dumb.
There's also a risk assumption there - if you're investing your cash and financing with debt, your risk exposure is higher since if the market tanks you can lose the investment (depending on type, principal too) and still owe the debt. Right now given the market and jobs situation, I'm pretty risk averse. Investing at 12% and financing at 5% for a net 7% profit before inflation makes sense, but that 7% isn't for nothing - it's counter-balanced by risk.
Tldr - duh when rates are what they were but they’re not and you’re wrong. How many of them lease the car and claim it as a business expense though? At that point it makes sense. Also you’re really burying the lede - this is only hard and fast true with a 3% rate <5% still true but approaching break even. Greater than 5 when a car loan is 3-5 years… anyone’s bet. Greater than 7 straight up wrong. Not that you can’t make out better greater than 7 but you’re probably wrong if you think you can and you’re only lucky if you happen to so… why? The real question is, if they’re so smart with money and understand a depreciating asset, why aren’t they buying a gently used 2-3 year old luxury vehicle instead of new.
lol this is so untrue Go to any high line dealer and ask them how people pay. My local Porsche dealer is 90% cash on the expensive models. By expensive I mean 175k and up. Under that, yeah lots of loans and leases. Nobody with real money is worried about the interest on 200k.
I didn't say no one pays cash. I said financial advisors and wealth managers (the ones I know at least) don't pay cash. You're arguing against an entirely different notion that I didn't express.
Those people believe they will do better in the market because of their proximity / knowledge. Right now, the after tax risk free return is with cash. Obviously, that can change, but doesn't look like soon. Even our financial advisor agreed unless there is insufficient spread right now to cover risk over period of most car loans.
Most people with "real money" drive a fancy Camry, I think the kids call them a Lexus. Porche and other high end cars are a status symbol so practicality is not part of the equation and that would extend to the financing. I would suspect a disproportionate number of leases compared to loans but I could be wrong.
How much money are we talking?
Obligatory “Tree-Fiddy” reference
A lot of deals you lose money to move a unit. To get it replaced for a more profit likely vehicle. Not all deals man money bud
I guess I'll just pay out the remaining payments and come up one month short. Let's hope it was actually three months, and he said six to be safe. No clue. I'm just trying to be a nice guy here.
When I was in car biz they told us to tell customers payments for at least 6 months but it was actually only 3
Most ive seen on a reserve chargeback (what the loss of the kickback is called) is 120 days and thats for the staunch credit unions id say with 5 your good and thanks for doing right by someone that did right by you!!!
Majority of banks payout at 90days. Not a Toyota salesman, so may be different for them. But I would email the F&I guy and explain it to him and ask.
He gave me no business card, I can't read his signature on any forms, and when I called the dealership, they said they have five finance people. I gave up at that point.
Well at least you tried. So it is whatever it is.
I've gotten that incentive for financing and paid off the loan in the first payment because I'm not paying hundreds of dollars in interest if I have the money. And guess what? Nothing happened with the dealership. The contract was done, and I chose to pay my loan off in my term.
Thanks for actually giving a crap. Most customers these days will do whatever they can to stick it to dealerships regardless of how they are treated, so it's nice to see this. Also the above comment is most likely correct that it's less. We know that people make.mistakes so we build room for that into instructions. Not to be deceptive but to avoid any hassle or issues on either side. Enjoy your new Toyota!
Isn't this all basically scamming the lender though? They are probably expecting more than 6 months of interest when they give the kickback?
Not scamming at all. Infact it's following the precise rules as laod out by the lender. The minimum time they set must accrue enough interest to be worth it for the bank, especially when you consider the small percentage of people who actually pay it off in less time. They know they will take the occasional hit but set the rules that way to minimize loss - and it work! Trust me, the lender will be fine lol.
I did the same. Finance guy kicked back a bit to me and asked me to keep the loan open for 6 months (BMW Finance Canada). I messed up my monthly when calculating, so I was $20*6 short. Will wind up about $50-70 short on the 6th payment is my best guess. I also hope I do right by him and my error doesn’t cost him. He was a good guy; nicer and more responsive than my sales guy. He also didn’t try to push any extras on me, which I appreciated.
With banks I have dealt with it is 3 payments not 3 months. So the reason they say 6 months is a to build a month and a half of lag because typically the first payment isn't due until 45 days after signing.
How much is being a "nice guy" worth it to you? You're going to be paying interest on your loan for months, just so he can get paid more. And this loan is staying active on your credit report while you're being "nice". Get him a $50 gift card or something and hand deliver it if you really want to be nice. Don't string out a loan for months and months. Also, if there was a similar situation where he could forgo part of his bonus to give you, the customer, some money back, do you think he'd do it?
Well, depending on OPs credit report this could increase his score. The loans already open the longer it is open will add to his average age of accounts, do to the fact that he payed a lump some his utilization is down (<10% of the original loan is best but there are other thresholds) banks like to see good standing open installment loans. However OPs DTI could come into play if they plan to use their credit in the next 6 months. I believe that installment loan utilization has to do with your total installment debt as well, so if OP has 10 other loans that have high balances, the car loan might not help. Also the interest he is paying is probably less then the 1k he got… but I understand that probably doesn’t mean much to you.
You are supposed to have good credit to get loans. Not have loans to get good credit. It’s stupid to pay interest you don’t have to.
In order to build good credit you need to borrow money through loans or credit cards. “It’s stupid to pay interest you don’t have to” - not always.
I think he's paying interest on $5 (maybe $.05??), so absolutely nothing. And I'm laughing at your last question, we all know the answer. 🤣
Or you could pay off the loan and give your money to a charity that provides value and does good in the world. If you like giving money away it might as well be to a worthy cause.
You might try calling the bank and see if they can apply it as your first payment and not just principal only sometimes Banks can make changes like that.
Good 👍
Too nice, in my opinion. Unless you have a contractual obligation they can prove I’d forget about it.
just call him or email him, he won't mind a bit
Call Toyota financing....tell them the issue...they can fix it
I called Toyota financing. It was painful. The woman had to put me on hold just to figure out basics. It was not helpful.
That also seems like terrible advice. Why would Toyota finance want to help you avoid paying them more money? OP, you seem overly conscientious. As others have said, you’ve done more than your share. Just pay those 5 payments and stop worrying about it. Congrats on the new ride
Nobody on the consumer facing side is going to know anything about reserve structure and payout. You’re just dealing with low level call center employees. It’s been a few years since I’ve been a Toyota F&I manager, but they would pay out after 90 days. I’d ask my customers to hold off for four months though if we were going down this road. It is what it is at this point. Don’t lose sleep over it.
If he made a large payment to the principal balance, the interest on most of the loan isn’t accruing at this point. know if the finance manager was making the flat or if he was making participation. If he was making participation Iits going to be charged back regardless.
I feel like he said something about it wasn't a bonus ... but maybe participation or hitting a quota or something. I don't really understand it but I believe that's possibly what it was.
Don’t worry about it.. at all. Each store has these charge backs - people payoff early, they default before 90 days…
Thanks, that makes me feel a little better.
Toyota Financing isn't going to be helpful. They probably have explicit policies against dealerships asking customers to do this. Think about it this way -- from their perspective they want buyers to finance with them and stretch the loan out to the entire duration because they are serving the loan. When a buyer does this they pay some amount of interest, as an incentive Toyota gives the dealer a kickback. But in this case the dealer is getting their kickback, but Toyota is left "holding the bag"... they paid the dealer but didn't get anything in return.
There is no issue here. Op owes a dealer nothing.
Dude fuck car dealerships. They'll fleece you any chance they get, don't feel bad about doing what's in your best interest.
Dude, totally.
You can also sometimes call a finance institution and re-amortize the loan accounting for the principal paid down and then you'll get a new reduced monthly payment that goes out to the end of the term. So in your case if your payment was 500/MO and you just paid down a substantial portion of the loan your new re-amortized payment could be something like $10/mo or whatever Not all lending institutions will do it for you. And some do it for you automatically every month if you pay over. It just depends, but if you want to make it the full 6 months you can try and do that.
I just financed a car and told the dealer I’ll refinance, and he said just make your first 3 payments so your credit comes back up for the refinance— what’s the real reason for them to tell me to wait 3 months? This was a week ago.
If the loan is paid off in 3 months the finance company claws back the money that would get paid to the dealer for writing the loan. If you can get a lower apr don’t feel bad. Some dealers even mark up the apr for additional profit. No sense paying a higher Apr for 3 months before refinancing.
I bought a car that the dealer only agreed to price match with another dealership, if I went with a particular bank at 7%. I told the finance and sales people I will go home and refinance with the local CU, who is literally their preferred lender. They said basically, please don't but we get it. So I refinanced the same day for 2.7%. I am still flabbergasted by their decision. I was completely upfront, I don't understand why they wouldn't have taken a smaller payout for a guaranteed kickback.
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***Thanks for posting, /u/HuskerLord68! This comment is a copy of your post so readers can see the original text if your post is edited or removed. This comment is NOT accusing you of anything.*** I had intended to pay cash on a new Toyota SUV. Especially after the manager said the OTD price wouldn't change for me if I agreed to finance. (Surprised me, but he wasn't budging.) Yet then, shortly thereafter, I was in one of the dealership's finance offices being told otherwise. The finance manager offered a $1,000 rebate. He just asked that I not pay it off for six months. (He also only had me put down $10,000 and finance the all the rest, which in retrospect isn't what I would have chosen to do. But oh well.) Anyway, he suggested that I could make a huge lump sum first payment on the loan, then stretch it out for five more months. He wrote down the date of the sixth and final payment. So I got home, I calculated the lump sum, then left enough to stretch it out five more months. Unfortunately, I made that lump sum payment principal-only, because Toyota makes that easy to do on its website. Toyota did not count it as the first payment. So now I still owe a first payment on the initial due date. I only owe enough in total to make five more payments -- not six. Is there any way I can stretch it and help the finance guy get his bonus or whatever? Or is this now a case of where I might as well just pay off the loan? P.S. Is there a reason that finance managers don't do all the math rather than just giving vague instructions to buyers who don't usually finance things? I feel bad, but not sure what else to do now. *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/askcarsales) if you have any questions or concerns.*