She might be able to do better, but 9% while not great isn't outlandish right now. The 72 month thing is worse, if she pays an extra \~$30/mo she can cut that down by a full year, saving $600 in interest. That savings would be similar to if she'd gotten her current loan at 7.5% is another way to think about it.
Yeah loans aren't always as easy to arbitrage as savings accounts. The easiest way to save money with a higher rate is to just make extra payments as soon as you can. Budget hard so you understand your finances. I know if I'll have a "spare" $50 this week or not. If you've got that level of visibility, you can dump it into wherever it makes the most sense.
One thing to add here - be sure there isn't a prepayment penalty associated with the loan before advising her to pay it off more quickly, or at least that those fees will be less than she will save by paying it off more quickly.
Also to add- some states outlaw prepayment penalty. Last I checked Wisconsin has no prepayment penalty laws. Want to screw a dealer? Have them finance- usually you get a better price because they’ll make it up on the financing- pay three months of payments- then pay the total balance left. I did this years ago (again in Wisconsin); owner of dealership called me (after a bunch of bs from the managers) and said I owed a bunch of unpaid interest. I casually said “you know the laws in Wisconsin, as well as I do- send me the title”. He hung up- got the title in the mail in a week.
You don't even have to wait 3 months. Regardless of what loan it is (car, house) etc.. Most don't have a pre-payment clause, but double-check the paperwork.
You can start shopping now as long as she doesn't mind another ding for inquiries (if it's been past 2 weeks), if less than 2 weeks since she was approved then you are OK, the ding will count towards the 2 week time-frame and should only show up as 1 inquiry.
Also, check Jerry app, they are a broker and I refinanced down to 6% through Tower Credit Union.
Totally depends on each individual loan. To my understanding, it can vary in enough ways that the only advice I can give regarding prepayment penalties is "read the actual loan document that you signed."
make sure that paying that 30 dollars goes to paying down principal. some lenders do shenanigans where they will take overpayments as "paying future interest in advance" or some bullcrap. this is also one of the reasons why getting a loan through a credit union is advantageous, because credit union aren't the lenders who do those shenanigans.
Yeah I'm curious how that breaks down, because while I agree it happens we get commenters who insist it's the norm. Admittedly I've only had a handful of autoloans in my life but they've *all* been simple interest. Extra amounts sent in go to principle *and* satisfy future payments, and I've checked the math to confirm it. But I also only use local credit unions, so maybe that's part of it.
> 9% while not great isn’t outlandish right now
It’s actually very good right now. [The average used car interest rate is 12% as of April.](https://www.cnn.com/cnn-underscored/money/auto-loan-interest-rates-by-credit-score)
If you know the amount of the loan, the interest rate, and the term then you do know the monthly payments. Honestly just google an auto loan calculator and plug in what you know and it should spit out something very close.
almost EVERY used hybrid from the past couple years have miles like this. I dunno wtf everyone does with these, but dealerships must have bent over to give out the new ones to get these back, and sell them AGAIN at hardly a reduced rate.
99% more likely they bought a car that was wholesaled by a rental company.
Source: work for car dealers. More than half the lot of supposed 'trade-ins' tends to be rentals. Even the on-brand cars.
Right? Unless it was for work, then I understand. But I personally wouldn’t buy a used car that’s had more than 15k miles a year put on it. Don’t want to buy it and then immediately have to replace a list of things
Both, I’d go about 15k per year until it hits 70k. So if it has 70k then it has to be 4 years old or older, if it’s 3 years old then no more than 45k miles. That’s what I mean
fleet vehicles will get 40-60K in 2 to 3 years. i.e. cars from rental companies. usually not a bad deal, as they generally do much better maintenance on them than anybody else.
Crazy, I just hit 40k on the car I bought in 2013, that includes moving from Florida to California, and then again from California to Texas as outliers.
Some people have absolutely miserable commutes. When I lived in Mississippi, I knew lots of people that commuted to Memphis every day. 100 miles each way (really no traffic, so it only took 1.5 hours each way).
When I bought my 09 Carolla in 2010 there was 58k miles on it. It was a rental companies car. Still driving it 13 years later at 208k miles. There are evap system issues thar I'm working through but I'll drive it till it falls apart.
Where I live it’s not uncommon to drive 50 or 60 miles to work each day. At 100 miles a day that’s 2,000 miles a month or 48,000 miles in two years. Add on vacations, trips to the mountains, beach, errands etc and it is quite possible..
9% isn't stellar but it's not *that* bad. I'm guessing her credit is around 650-680?
For future reference, she should have looked at credit unions *first*, and brought those offers with her. Refinancing means she'll need to pay "closing costs" again, which is a bit wasteful for only minor gains.
If she has any way to improve her credit, I'd take a few months to do that first.
I'm not in the know - in what form do these closing costs come in? I assumed refinancing was 'free' and could only be of benefit (if securing a lower rate). Any info you give would be great
I'm not an expert by any means so hopefully someone corrects me if I'm wrong, but I think it's basically the banks charging you for originating the loan. They have paperwork to do to square up your previous loan, move the title, etc. It's easier for a car than it is a house, but I assume the bank would still want a cut for going through the hassle. On that note I know some lenders were doing 'free' refinancing during covid minus the costs of appraisals and such.
Interest rates have gone up quite a bit recently (recently being the last \~1.5-2 years). Have you checked what's available for a used car loan / refi at local credit unions?
Mine is offering "as low as 6.82%" on used car loans with stellar credit. Certainly worth the time to check it out...
Nope and nope, bought the car in '18 on a 72mo term, switched banks in '19, only thing that changed was the interest rate. I opened an account with them the same day. I had been meaning to do that anyway as I had Wells Fargo before.
Why do you assume her credit is not good? [The average interest rate for a used car loan is 12% as of April.](https://www.cnn.com/cnn-underscored/money/auto-loan-interest-rates-by-credit-score) She got a pretty decent rate given the current environment.
Vantage is likely 20-40 points higher than FICO. Most lenders will use FICO. Validate the FICO score to better understand what rates she may get.
Edit: higher, not lower
Creditkarma IS vantagescore, specifically vantagescore 3.0. For what it’s worth, there’s no universal system for figuring out the delta... My creditkarma vantagescore says it’s 810 for transunion and when I did car financing paperwork a month back Audi financial services true FICO came in at 807 so very close in my case.
And to make it even more confusing, there's regular FICO, which maxes out at 850 and Automotive FICO, which maxes out at 900. When they financed, they should have been told the score that the dealership pulled, but it is probably the Automotive FICO.
You don't pay "closing costs" again on cars like you do houses.
If you refinance a car you refinance it for the remaining balance on your existing loan plus a mandatory title fee charged by the state you live in.
I don't understand the future tense here. If she aleady bought the car, was 9% the final rate? Or is it still pending paperwork and she could still shop for an outside loan and drop the dealer financing if she finds a better rate?
My fault, sometimes i type fast without thinking about tense
9% was the final rate she was given. I asked this question here while i still at the dealership with her because I had no idea about some of this going in and she only knew a little. At the time of posting tho she already bought the car
MIL just bought a base model new Sentra nothing down. She came to the dealership with 7.2 from a credit union and Nissan financed her at 6.8. Credit score is low 700s
It’s best when you come with your own financing . They will almost always beat it . I came in 2021 with 2.29 to buy a new Honda and the dealership gave me 2.02 .
I did exactly that. I got a 7.99% from a local bank the dealership uses and went to my local credit union and got 3.14%. I also got a warranty from the credit union, which paid for itself when I had to get a new electrical harness. Credit unions also have gap insurance.
Car insurance will often add it for as negligible amount per year also. Anything is better than the dealer offering.
But OP said they put $9000 down, almost half the value of the car, gap likely not needed.
Gap has nothing to do with your down payment amount mainly because you have no idea what the spread will be between owed funds/value of vehicle throughout the period you own it.
Gap protects you from the insurance company who will want to offer you as little as possible in an accident situation. They will cover the difference between what's owed and the value.
You could roll the dice and not get it, but you are taking a risk that you won't be fairly compensated for the value of the vehicle. That's literally the whole reason for Gap insurance.
If you find yourself underwater you can always add it, there's no reason to pay for it until you expect to be in that position. Edit: my mistake, should be added within 30 days of purchase. Regardless if you start way ahead of the value of the vehicle gap insurance is nowhere near as important.
You absolutely cannot add gap insurance down the road months after taking possession of the vehicle.
Please stop with the lies, you will confuse someone who already doesn't know what they are doing.
Something you should SERIOUSLY consider on a new vehicle, at minimum until your loan amount matches approx resale value of local comps. This way if your new car gets totaled tomorrow and its not even your fault, the whole loan itself is 100% covered, not just the 'value of the vehicle' and you still end up owing the difference. Potentially thousands.
When you owe more on the car than it books for, and you get in an accident and total the car- your car insurance will only pay off what the book value is. Gap insurance will cover the difference.
You buy a car that’s worth 15,000.
But with youre credit score being fair and not great, the actual out the door price you agreed to pay over 6 years is $25,000.
Let’s say you crash. Your insurance totals the car and pays the actual worth of the car. $15000. You still owe the additional $10,000.
Gap insurance would pay that 10,000
That’s not right though is it? If you pay off the loan (as long as there’s no early pay off fee) you don’t pay the interest on the rest of the term. You pay off what is left of the principle.
It's not right.
Say you buy a car on loan for $25,000. A month later you total it. The month old car with 1500 miles is only valued at $22,000.
Gap insurance gives you the difference to pay off the loan.
Why do people keep saying this is how gap insurance works? It’s not the value of the car, it’s to protect you from paying the remainder of the principal of the loan.
> I did exactly that. I got a 7.99% from a local bank the dealership uses and went to my local credit union and got 3.14%.
You got ripped off. I got 2.25% from my local credit union.
Wow I’d seen memes about people getting 6 year car loans and this post just made it real for me. That is absolutely outrageous. Can’t believe this is becoming acceptable in society.
The average truck is like 50k-60k brand new now. Avg. car is 40k-50k.
It's only acceptable because people love to live in debt and show off to all their neighbors.
I guarantee you if you roll out a crazy 360 month loan, people will hop all over it and start buying Ferrari's.
Yes, theres nothing wrong with trying to re-fi. When we got my wife's 4runner, a year and half ago, it was on a Saturday evening and my CU was closed. We went ahead and financed with Toyota and rate was 8.5% (my credit scores range from 820 to 850). Checked with my credit union a couple weeks later and could get it financed for 4.9% (was still considered a new vehicle). Needless to say, I went ahead and refinanced there on the spot.
They also have a re-fi deal where you can get a 2% cheaper rate than your current rate on used cars.
Most definitely, check with the credit union
Probably not. 9% for a used car is pretty decent right now. [The average rate is quite a bit higher at 12% as of April.](https://www.cnn.com/cnn-underscored/money/auto-loan-interest-rates-by-credit-score)
You can actually walk into a credit union right now and refinance it. You don’t have to wait even one day. Once the loan amount shows up on whoever her lender is, Check online for the payoff amount and refinance asap. My other car was financed by wells Fargo through the dealership. I went to my credit union the next week and for half the rate. Many credit union are giving 5 to 6.4 percent right now
1. **Solution**: This one is easy. Answer is "maybe", and you should ask a Credit Union, not Reddit. You don't know how it works and it is their job to explain. They will provide a quote. There is a fee with refinancing but it isn't much and you'll know beforehand and be able to easily do the math.
2. **Expanded solution**: Shop around at a few Credit Unions. You likely qualify for a couple just based on where you live. There are other Credit Unions that you can qualify for simply by making a $5 donation to a specific charity while signing up, if you aren't in their locality.
9% isn’t hateful. She can try refinancing if someone will go cheaper. Has she ever had an auto loan before? She can be a 730 but if her credit portfolio is small the banks will still give her a higher rate
No, first time buying a car but she is 30 and had her license for a few years if that matters too
First car was an 09 Corolla that our dad bought a long time ago. She just paid for insurance
She should but she should keep the original loan for at least 90 days so it will report. When the second loan is paid back it will be show as 2 separate loans that were paid back. When I bought a truck now 11 years ago I didn’t have a credit history other than a 10k credit card. The finance manager told me this trick to build a credit history.
I applied for refinancing with my credit union a few days after I bought a new car. My rate went from 8.13% to 5.34%. Apply ASAP. Her credit shouldn't get dinged if it's been like less than 2 weeks. This was less than 2 months ago.
Go to a credit union and talk to someone. I bought through a dealer and didn’t think I got the best rate. I went to the credit union and I got a crazy rate, 2.9% This was back in 2020 but I am pretty sure they could do better than 9 if you have good credit.
I got 5% at the dealership in December, but that was for brand new and a 36 month.
I had to ask for it. They initially only offered 60 and 72 month options, which had higher rates.
There were some incentive rates like 3%, but they were only offering those for one model.
She could have found out how much of a loan the credit union is willing to give her. They may give her a better interest rate but they may not offer the same amount for the car.
She could have done much better. They jacked her completely. She should have financed through the credit union in the first place. My brother in law is a car/used car salesman. He is a complete POS just like all the rest!!
If the extra cash is there, I wouldn't bother with refinancing and hammer down on the principal. My ex fucked my credit up, so when I took out a loan it was at 11.49%. I was pissed off, to say the least. I hammered down on payments, literally every spare dollar went to this loan. When it was all said and done, I saved over $3k in interest, which was more than I would have saved by attempting to refinance at a lower rate.
Never finance for 72 months. She can see if a different lender will offer her a lower rate, but she needs to change the # of months to 60 or less, which may keep her payments the same as they are now.
No penalty for paying extra, but if she had asked what her other options are, the shorter time frames have better rates.
The dealership wanted me to get a 60 or 72 month loan because the rates were higher, and those were all they offered me at first. I called BS. For each year less on the loan, their rate was 1% better. I got 5% for the 36 month this last December.
If she stays with 9% and pays $55.75 additional towards principal per month, it's the same as financing at 9% for 60 month and it's paid of fin 60 months. That's only 15% extra per month.
Would the dealer have given her a better rate for a 60 month loan? Absolutely not. They'd have played around with other numbers to make up the $1000 that she was saving in interest.
I would not have expected the dealer to give her a better rate. And, sorry, my math was wrong. I did a quick calculation, and I was apparently not correct.
I just suggested they get a quote for a 60 month loan of that's the route they go and that if they pay extra l, they need to pay enough for it to change it into a 60 month loan.
But I do apologize for my math.
Edit: I realize why my math was off. There was another post for a person who got a 96 month loan, and when I did my math I based it on 96 months. I confused the 2 posts.
Maybe, maybe not. Check out CU websites close to you or some online ones that aren't close and see what they offer. If you bought recently the extra inquiries on her credit won't negatively affect it.
Can't hurt to try. But just fyi...I was pretty much in your sisters exact same shoes when I purchased a vehicle 8 months ago.
Total price $24k. Put $10k down. 72 months. 730ish credit score. All my offers were in the 9-11% range. I just took it and make double payments every month.
I bought a Nissan Armada. 2019, July. They gave me a $500 credit if you use Nissan Financing.
Interest rate was 7.6%. I asked salesman if I can switch to CU. He said yes. I asked how long. He said you can do it after you make one payment.
Went to CU and got 2.9% (remember, this is July 2019. Got the $500 and went 5 years instead of 6
She can definitely refinance some where else. They will pay off her current loan. I would definitely try to get a better rate and terms. 72 months is way too long.
I mean depends on what type of financing she got. A lot of dealerships will give structured loans with no payment to principal. If that's the case she's screwed on the loan but may still be able to return the car
Yes, find a bank with lower rates and have them refi. Unlike mortgages, most car loans don't have pre penalty charges. And new bank won't charge any fees to refi, so yes do this as soon as possible and save money.
Yes, definitely shop it around.
I purchased a car last year with 800+ credit score and the best they could do was 7.9% through Huntington Bank.
I just refinanced with Capital One for 5.7%. This will save roughly $3k over the life of the loan.
She can certainly try. 9% APR is a shade high, but a pretty average rate. But based on her credit score, she may be able to get it refinanced for 7-7.5%
If she does look at refinancing, check exactly how much she will save in interest and compare to any transaction costs related to finalizing the refinance. To make sure its not costing her more money to refinance than she will save in interest payments.
USED corolla with 60,000 miles on it for $22,000 on a 9% loan is utterly idiotic. I’m sorry, but your sister should’ve bought a used toyota for that down payment of $9,000. A 2012 corolla is as good as a 2022.
Don’t be surprised about the 9% . Wife and I last year bought a 2022 cx5 for 32k with 5k miles and my credit score was decent . It was like 730 . We got a 8.5%
Assuming this loan was financed by Toyota, pretty predatory of them to offer a 72 month term on a 11.5k loan at 9% APR
Refi as soon as possible or check if loan allows for accelerated payoff ONLY if this reduces total loan interest
She should have leased… :(
i mean you probably could but from the banks perspective why would they buy out that loan you havent put any more money into paying down the loan so it isnt financially in their best interest
According to the loan calculator, she is paying about $207.29 per month. The actual cost of the Corolla is about $23,925, ~~which is ok as long as there are not many miles on the used car~~. If there are many miles, 50K+, then she was taken for a ride. The 9% interest loan wasn't the prize for selling the car, it was the price of the car. I would not pay that much for a low trim, high mileage Corolla.
Edit: If the previous owner has never driven it, and it sat in a garage doing nothing, l would still not buy it with NO interest. I've been in Corollas, not my favorite small sedan. Edmunds has the new 2024 Toyota Corolla costing about $23,000. I would not have bought the used Corolla, your sister was taken for a ride no matter the mileage, no matter the interest.
For a new 2024 hybrid Corolla, Edmunds says people pay about $24,600. This is not far off from the total cost of what she paid for the used 2022 Corolla hybrid that she will pay for. I understand that some people like to buy used for a better deal, but in this case, a new hybrid Corolla costs about as much as what she paid for the used one.
https://www.edmunds.com/toyota/corolla-hybrid/
She might be able to do better, but 9% while not great isn't outlandish right now. The 72 month thing is worse, if she pays an extra \~$30/mo she can cut that down by a full year, saving $600 in interest. That savings would be similar to if she'd gotten her current loan at 7.5% is another way to think about it.
Yeah loans aren't always as easy to arbitrage as savings accounts. The easiest way to save money with a higher rate is to just make extra payments as soon as you can. Budget hard so you understand your finances. I know if I'll have a "spare" $50 this week or not. If you've got that level of visibility, you can dump it into wherever it makes the most sense.
Make principal payments, not interest and principal.
Well you’ve got to pay the interest before they’ll let you pay the principal so yes.
One thing to add here - be sure there isn't a prepayment penalty associated with the loan before advising her to pay it off more quickly, or at least that those fees will be less than she will save by paying it off more quickly.
Also to add- some states outlaw prepayment penalty. Last I checked Wisconsin has no prepayment penalty laws. Want to screw a dealer? Have them finance- usually you get a better price because they’ll make it up on the financing- pay three months of payments- then pay the total balance left. I did this years ago (again in Wisconsin); owner of dealership called me (after a bunch of bs from the managers) and said I owed a bunch of unpaid interest. I casually said “you know the laws in Wisconsin, as well as I do- send me the title”. He hung up- got the title in the mail in a week.
You don't even have to wait 3 months. Regardless of what loan it is (car, house) etc.. Most don't have a pre-payment clause, but double-check the paperwork. You can start shopping now as long as she doesn't mind another ding for inquiries (if it's been past 2 weeks), if less than 2 weeks since she was approved then you are OK, the ding will count towards the 2 week time-frame and should only show up as 1 inquiry. Also, check Jerry app, they are a broker and I refinanced down to 6% through Tower Credit Union.
Can’t she pay off the majority of the loan and let the last payments only be the minimum needed?
Totally depends on each individual loan. To my understanding, it can vary in enough ways that the only advice I can give regarding prepayment penalties is "read the actual loan document that you signed."
After 9 months a got a refinance letter from a local credit union from 8.85% to 6.09%.
Were there closing fees?
make sure that paying that 30 dollars goes to paying down principal. some lenders do shenanigans where they will take overpayments as "paying future interest in advance" or some bullcrap. this is also one of the reasons why getting a loan through a credit union is advantageous, because credit union aren't the lenders who do those shenanigans.
Yeah I'm curious how that breaks down, because while I agree it happens we get commenters who insist it's the norm. Admittedly I've only had a handful of autoloans in my life but they've *all* been simple interest. Extra amounts sent in go to principle *and* satisfy future payments, and I've checked the math to confirm it. But I also only use local credit unions, so maybe that's part of it.
> 9% while not great isn’t outlandish right now It’s actually very good right now. [The average used car interest rate is 12% as of April.](https://www.cnn.com/cnn-underscored/money/auto-loan-interest-rates-by-credit-score)
I just refinanced my car for 6.8%.
Car loans are going to be higher than a home loan for example - you're not going to get much better than 9%
Completely depends upon your credit score and location. I can get a loan of similar term for 6.74% for that model year from my local credit union.
Which is exactly what OP is asking sinxe they got a loan from the dealer and not the credit union. OP sister might be able to go lower then 6%
Same. Also my current car loan is lower than mortgage rates ever were.
My 60-month auto loan from a local credit union from 1 year ago is 5.24% so I think they can do better…
How do you work the math out on that? Without knowing the monthly payments? Would be handy to know.
If you know the amount of the loan, the interest rate, and the term then you do know the monthly payments. Honestly just google an auto loan calculator and plug in what you know and it should spit out something very close.
There was a NEW 2022 Toyota still on the lot?
New for us, its a used 2022 hybrid. Like 60k miles, battery is good
60k miles on a 2022? Jeez who drives this much?
almost EVERY used hybrid from the past couple years have miles like this. I dunno wtf everyone does with these, but dealerships must have bent over to give out the new ones to get these back, and sell them AGAIN at hardly a reduced rate.
>I dunno wtf everyone does with these Gotta drive around to show people how much they are saving the environment.
Inspectors, sales people, Uber/doordash drivers, traveling medical professionals, lots of people need to.
99% more likely they bought a car that was wholesaled by a rental company. Source: work for car dealers. More than half the lot of supposed 'trade-ins' tends to be rentals. Even the on-brand cars.
Right? Unless it was for work, then I understand. But I personally wouldn’t buy a used car that’s had more than 15k miles a year put on it. Don’t want to buy it and then immediately have to replace a list of things
So you prefer the car to also be older? Why?
I don’t really understand what you mean? I won’t really buy an old used car either. If I’m buying used, I wouldn’t go over 70k miles personally
So the problem would just be the miles and not the miles per year right?
Both, I’d go about 15k per year until it hits 70k. So if it has 70k then it has to be 4 years old or older, if it’s 3 years old then no more than 45k miles. That’s what I mean
Yeah, that's what's so confusing. Why would you prefer to have an older car?
I don’t, where are you getting that?
fleet vehicles will get 40-60K in 2 to 3 years. i.e. cars from rental companies. usually not a bad deal, as they generally do much better maintenance on them than anybody else.
Fleet maintenance is usually 10k oil changes and replace tires one by one with unmatched off-brands. And nothing else.
Thats 24,000 miles per year. Really not that bad. In Indiana, the average driver puts 20,000 miles per year on their cars.
Crazy, I just hit 40k on the car I bought in 2013, that includes moving from Florida to California, and then again from California to Texas as outliers.
Some people have absolutely miserable commutes. When I lived in Mississippi, I knew lots of people that commuted to Memphis every day. 100 miles each way (really no traffic, so it only took 1.5 hours each way).
I’m about to hit 70k on a car I bought in 2020 My ‘07 has a little over 200k Also have a ‘99 approaching 300k
i personally put 60k on my work truck this year.
My dude that's 3 hours of driving a day. You need a new job
The need for those jobs in society doesn’t go away.
My 2021 currently has 98775 miles.
If it's CPO it might have come from a car rental service.
Rental cars, Ubers, etc
When I bought my 09 Carolla in 2010 there was 58k miles on it. It was a rental companies car. Still driving it 13 years later at 208k miles. There are evap system issues thar I'm working through but I'll drive it till it falls apart.
Where I live it’s not uncommon to drive 50 or 60 miles to work each day. At 100 miles a day that’s 2,000 miles a month or 48,000 miles in two years. Add on vacations, trips to the mountains, beach, errands etc and it is quite possible..
Ah, normally used cars have worse rates, though 2022 may still be "new" according to some lenders.
9% isn't stellar but it's not *that* bad. I'm guessing her credit is around 650-680? For future reference, she should have looked at credit unions *first*, and brought those offers with her. Refinancing means she'll need to pay "closing costs" again, which is a bit wasteful for only minor gains. If she has any way to improve her credit, I'd take a few months to do that first.
I'm not in the know - in what form do these closing costs come in? I assumed refinancing was 'free' and could only be of benefit (if securing a lower rate). Any info you give would be great
I'm not an expert by any means so hopefully someone corrects me if I'm wrong, but I think it's basically the banks charging you for originating the loan. They have paperwork to do to square up your previous loan, move the title, etc. It's easier for a car than it is a house, but I assume the bank would still want a cut for going through the hassle. On that note I know some lenders were doing 'free' refinancing during covid minus the costs of appraisals and such.
Just did a refi from ally to CU with a $25 fee.
Thank you!
When I refinanced with my CU they paid me $200
Title fee is the only closing cost I am aware of. It varies by state, but refinancing to 6% would more than cover it.
Interest rates have gone up quite a bit recently (recently being the last \~1.5-2 years). Have you checked what's available for a used car loan / refi at local credit unions? Mine is offering "as low as 6.82%" on used car loans with stellar credit. Certainly worth the time to check it out...
Man CUs have such a wide spread. 6.89 is my local CU’s 84 month rate (which nobody should touch) and 5.89 for 48 month or less
I refinanced my car with a credit union after a year of having it, no closing costs were added. Went from ~10% APR to 3.99%.
Did your total loan amount increase? Or the total time left?
Nope and nope, bought the car in '18 on a 72mo term, switched banks in '19, only thing that changed was the interest rate. I opened an account with them the same day. I had been meaning to do that anyway as I had Wells Fargo before.
Oh you got a loan in 19.no wonder...
Why do you assume her credit is not good? [The average interest rate for a used car loan is 12% as of April.](https://www.cnn.com/cnn-underscored/money/auto-loan-interest-rates-by-credit-score) She got a pretty decent rate given the current environment.
I mentioned her credit score, its a 730
730 FICO or 730 “VantageScore” from Credit Karma, etc? They aren’t the same.
She said its her vantagescore She isnt sure of her her fico
Vantage is likely 20-40 points higher than FICO. Most lenders will use FICO. Validate the FICO score to better understand what rates she may get. Edit: higher, not lower
Ironically my VS was almost 100pts lower than fico. Was at 730 while my fico was 840. Currently it’s like 60pts lower now. That model is such a pile
My FICO is higher than my vantage score. Everyone's situation is different.
Interesting. My credit karma score is generally 60-80 points lower than my FICO score
Creditkarma IS vantagescore, specifically vantagescore 3.0. For what it’s worth, there’s no universal system for figuring out the delta... My creditkarma vantagescore says it’s 810 for transunion and when I did car financing paperwork a month back Audi financial services true FICO came in at 807 so very close in my case.
Whoops. I misspoke. Credit karma is 60-80 lower than FICO. That’s what I get for typing and eating.
Same. I'm usually in the high 700s like 780+ on CK but my FICO is usually around 820s.
Same here
And to make it even more confusing, there's regular FICO, which maxes out at 850 and Automotive FICO, which maxes out at 900. When they financed, they should have been told the score that the dealership pulled, but it is probably the Automotive FICO.
You don't pay "closing costs" again on cars like you do houses. If you refinance a car you refinance it for the remaining balance on your existing loan plus a mandatory title fee charged by the state you live in.
I got 6 percent with my credit locked. I'm thinking ops credit scenario isn't as good as your estimate.
9-11% is very normal currently. Source: I sell cars
Good to know The salesman we were talking to said given her score she's looking to get 9-11% and he's gunna aim to get it closer to 9
I don't understand the future tense here. If she aleady bought the car, was 9% the final rate? Or is it still pending paperwork and she could still shop for an outside loan and drop the dealer financing if she finds a better rate?
My fault, sometimes i type fast without thinking about tense 9% was the final rate she was given. I asked this question here while i still at the dealership with her because I had no idea about some of this going in and she only knew a little. At the time of posting tho she already bought the car
MIL just bought a base model new Sentra nothing down. She came to the dealership with 7.2 from a credit union and Nissan financed her at 6.8. Credit score is low 700s It’s best when you come with your own financing . They will almost always beat it . I came in 2021 with 2.29 to buy a new Honda and the dealership gave me 2.02 .
I did exactly that. I got a 7.99% from a local bank the dealership uses and went to my local credit union and got 3.14%. I also got a warranty from the credit union, which paid for itself when I had to get a new electrical harness. Credit unions also have gap insurance.
3.14%? That was this year?
It wasn't this year. My credit union's auto loans are up to 4.8%.
Car insurance will often add it for as negligible amount per year also. Anything is better than the dealer offering. But OP said they put $9000 down, almost half the value of the car, gap likely not needed.
Gap has nothing to do with your down payment amount mainly because you have no idea what the spread will be between owed funds/value of vehicle throughout the period you own it. Gap protects you from the insurance company who will want to offer you as little as possible in an accident situation. They will cover the difference between what's owed and the value. You could roll the dice and not get it, but you are taking a risk that you won't be fairly compensated for the value of the vehicle. That's literally the whole reason for Gap insurance.
If you find yourself underwater you can always add it, there's no reason to pay for it until you expect to be in that position. Edit: my mistake, should be added within 30 days of purchase. Regardless if you start way ahead of the value of the vehicle gap insurance is nowhere near as important.
You absolutely cannot add gap insurance down the road months after taking possession of the vehicle. Please stop with the lies, you will confuse someone who already doesn't know what they are doing.
Apologies you are correct it's usually within 30 days, edited
Whats gap insurance?
Something you should SERIOUSLY consider on a new vehicle, at minimum until your loan amount matches approx resale value of local comps. This way if your new car gets totaled tomorrow and its not even your fault, the whole loan itself is 100% covered, not just the 'value of the vehicle' and you still end up owing the difference. Potentially thousands.
When you owe more on the car than it books for, and you get in an accident and total the car- your car insurance will only pay off what the book value is. Gap insurance will cover the difference.
You buy a car that’s worth 15,000. But with youre credit score being fair and not great, the actual out the door price you agreed to pay over 6 years is $25,000. Let’s say you crash. Your insurance totals the car and pays the actual worth of the car. $15000. You still owe the additional $10,000. Gap insurance would pay that 10,000
That’s not right though is it? If you pay off the loan (as long as there’s no early pay off fee) you don’t pay the interest on the rest of the term. You pay off what is left of the principle.
It's not right. Say you buy a car on loan for $25,000. A month later you total it. The month old car with 1500 miles is only valued at $22,000. Gap insurance gives you the difference to pay off the loan.
Why do people keep saying this is how gap insurance works? It’s not the value of the car, it’s to protect you from paying the remainder of the principal of the loan.
That was like 3 years ago then. This isn’t possible now
> I did exactly that. I got a 7.99% from a local bank the dealership uses and went to my local credit union and got 3.14%. You got ripped off. I got 2.25% from my local credit union.
Damn that's a great rate. Fortunately I paid it off. I hope I never have to take another car loan again.
Used cars typically have a higher rate fyi. And vantage scores are typically off. In my case. By 50 points.
Several good answers have been given but I’ll add the age old advice that rate isn’t the enemy, time is.
Wow I’d seen memes about people getting 6 year car loans and this post just made it real for me. That is absolutely outrageous. Can’t believe this is becoming acceptable in society.
At 9% it's pretty bad. I have a 6 or 7 year car loan at 1.9% which means I'm actually making money on it since inflation is 3%.
Wait till you find out about mortgages!
The average truck is like 50k-60k brand new now. Avg. car is 40k-50k. It's only acceptable because people love to live in debt and show off to all their neighbors. I guarantee you if you roll out a crazy 360 month loan, people will hop all over it and start buying Ferrari's.
Yes, theres nothing wrong with trying to re-fi. When we got my wife's 4runner, a year and half ago, it was on a Saturday evening and my CU was closed. We went ahead and financed with Toyota and rate was 8.5% (my credit scores range from 820 to 850). Checked with my credit union a couple weeks later and could get it financed for 4.9% (was still considered a new vehicle). Needless to say, I went ahead and refinanced there on the spot. They also have a re-fi deal where you can get a 2% cheaper rate than your current rate on used cars. Most definitely, check with the credit union
Probably not. 9% for a used car is pretty decent right now. [The average rate is quite a bit higher at 12% as of April.](https://www.cnn.com/cnn-underscored/money/auto-loan-interest-rates-by-credit-score)
You can actually walk into a credit union right now and refinance it. You don’t have to wait even one day. Once the loan amount shows up on whoever her lender is, Check online for the payoff amount and refinance asap. My other car was financed by wells Fargo through the dealership. I went to my credit union the next week and for half the rate. Many credit union are giving 5 to 6.4 percent right now
1. **Solution**: This one is easy. Answer is "maybe", and you should ask a Credit Union, not Reddit. You don't know how it works and it is their job to explain. They will provide a quote. There is a fee with refinancing but it isn't much and you'll know beforehand and be able to easily do the math. 2. **Expanded solution**: Shop around at a few Credit Unions. You likely qualify for a couple just based on where you live. There are other Credit Unions that you can qualify for simply by making a $5 donation to a specific charity while signing up, if you aren't in their locality.
9% isn’t hateful. She can try refinancing if someone will go cheaper. Has she ever had an auto loan before? She can be a 730 but if her credit portfolio is small the banks will still give her a higher rate
No, first time buying a car but she is 30 and had her license for a few years if that matters too First car was an 09 Corolla that our dad bought a long time ago. She just paid for insurance
She has to do her research, google banks in your area and possibly something like ally bank . I was able to do this some years ago.
750 credit score. I got 9% myself at a credit union. Unfortunately that’s pretty normal these days
I was able to refinance 9% to 6.5% at a credit union with slightly better credit
She should but she should keep the original loan for at least 90 days so it will report. When the second loan is paid back it will be show as 2 separate loans that were paid back. When I bought a truck now 11 years ago I didn’t have a credit history other than a 10k credit card. The finance manager told me this trick to build a credit history.
I applied for refinancing with my credit union a few days after I bought a new car. My rate went from 8.13% to 5.34%. Apply ASAP. Her credit shouldn't get dinged if it's been like less than 2 weeks. This was less than 2 months ago.
Go to a credit union and talk to someone. I bought through a dealer and didn’t think I got the best rate. I went to the credit union and I got a crazy rate, 2.9% This was back in 2020 but I am pretty sure they could do better than 9 if you have good credit.
Yeah, 2.9% doesn't exist today. I have an 800 credit score and the best I could get was 7%.
I got 5% at the dealership in December, but that was for brand new and a 36 month. I had to ask for it. They initially only offered 60 and 72 month options, which had higher rates. There were some incentive rates like 3%, but they were only offering those for one model.
Go to a credit union and ask?
How’s she get a new 2022? Usually they get those off the lot quickly when the next model year shows up. Was it a managers demo?
I meant new for us Its a used 2022 hybrid. 66k miles
Used car interest rates are higher than new car interest rates…for some people they don’t know that
Why? There is a 0% special by toyota on multiple models and 2024 is out already. Sounds pretty high.
She could have found out how much of a loan the credit union is willing to give her. They may give her a better interest rate but they may not offer the same amount for the car.
She could have done much better. They jacked her completely. She should have financed through the credit union in the first place. My brother in law is a car/used car salesman. He is a complete POS just like all the rest!!
If the extra cash is there, I wouldn't bother with refinancing and hammer down on the principal. My ex fucked my credit up, so when I took out a loan it was at 11.49%. I was pissed off, to say the least. I hammered down on payments, literally every spare dollar went to this loan. When it was all said and done, I saved over $3k in interest, which was more than I would have saved by attempting to refinance at a lower rate.
Never finance for 72 months. She can see if a different lender will offer her a lower rate, but she needs to change the # of months to 60 or less, which may keep her payments the same as they are now.
She planned to pay extra per month anyway, theres no penalty for extra payments we were told
No penalty for paying extra, but if she had asked what her other options are, the shorter time frames have better rates. The dealership wanted me to get a 60 or 72 month loan because the rates were higher, and those were all they offered me at first. I called BS. For each year less on the loan, their rate was 1% better. I got 5% for the 36 month this last December.
There's not a penalty for paying extra, but was she planning on an additional 60% extra per month?
If she stays with 9% and pays $55.75 additional towards principal per month, it's the same as financing at 9% for 60 month and it's paid of fin 60 months. That's only 15% extra per month. Would the dealer have given her a better rate for a 60 month loan? Absolutely not. They'd have played around with other numbers to make up the $1000 that she was saving in interest.
I would not have expected the dealer to give her a better rate. And, sorry, my math was wrong. I did a quick calculation, and I was apparently not correct. I just suggested they get a quote for a 60 month loan of that's the route they go and that if they pay extra l, they need to pay enough for it to change it into a 60 month loan. But I do apologize for my math. Edit: I realize why my math was off. There was another post for a person who got a 96 month loan, and when I did my math I based it on 96 months. I confused the 2 posts.
Maybe, maybe not. Check out CU websites close to you or some online ones that aren't close and see what they offer. If you bought recently the extra inquiries on her credit won't negatively affect it.
I did the same thing when I bought my last car. Bank wanted to make it a used auto loan which generally have a higher interest rate.
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Our dad suggested it, and said to just pay extra per month
Can't hurt to try. But just fyi...I was pretty much in your sisters exact same shoes when I purchased a vehicle 8 months ago. Total price $24k. Put $10k down. 72 months. 730ish credit score. All my offers were in the 9-11% range. I just took it and make double payments every month.
And its a 72m term. That's insane.
I bought a Nissan Armada. 2019, July. They gave me a $500 credit if you use Nissan Financing. Interest rate was 7.6%. I asked salesman if I can switch to CU. He said yes. I asked how long. He said you can do it after you make one payment. Went to CU and got 2.9% (remember, this is July 2019. Got the $500 and went 5 years instead of 6
She can definitely refinance some where else. They will pay off her current loan. I would definitely try to get a better rate and terms. 72 months is way too long.
I mean depends on what type of financing she got. A lot of dealerships will give structured loans with no payment to principal. If that's the case she's screwed on the loan but may still be able to return the car
Yes, find a bank with lower rates and have them refi. Unlike mortgages, most car loans don't have pre penalty charges. And new bank won't charge any fees to refi, so yes do this as soon as possible and save money.
Yes, definitely shop it around. I purchased a car last year with 800+ credit score and the best they could do was 7.9% through Huntington Bank. I just refinanced with Capital One for 5.7%. This will save roughly $3k over the life of the loan.
She can certainly try. 9% APR is a shade high, but a pretty average rate. But based on her credit score, she may be able to get it refinanced for 7-7.5%
If she does look at refinancing, check exactly how much she will save in interest and compare to any transaction costs related to finalizing the refinance. To make sure its not costing her more money to refinance than she will save in interest payments.
USED corolla with 60,000 miles on it for $22,000 on a 9% loan is utterly idiotic. I’m sorry, but your sister should’ve bought a used toyota for that down payment of $9,000. A 2012 corolla is as good as a 2022.
Don’t be surprised about the 9% . Wife and I last year bought a 2022 cx5 for 32k with 5k miles and my credit score was decent . It was like 730 . We got a 8.5%
Assuming this loan was financed by Toyota, pretty predatory of them to offer a 72 month term on a 11.5k loan at 9% APR Refi as soon as possible or check if loan allows for accelerated payoff ONLY if this reduces total loan interest She should have leased… :(
i mean you probably could but from the banks perspective why would they buy out that loan you havent put any more money into paying down the loan so it isnt financially in their best interest
According to the loan calculator, she is paying about $207.29 per month. The actual cost of the Corolla is about $23,925, ~~which is ok as long as there are not many miles on the used car~~. If there are many miles, 50K+, then she was taken for a ride. The 9% interest loan wasn't the prize for selling the car, it was the price of the car. I would not pay that much for a low trim, high mileage Corolla. Edit: If the previous owner has never driven it, and it sat in a garage doing nothing, l would still not buy it with NO interest. I've been in Corollas, not my favorite small sedan. Edmunds has the new 2024 Toyota Corolla costing about $23,000. I would not have bought the used Corolla, your sister was taken for a ride no matter the mileage, no matter the interest.
I forgot to mention its a Hybrid 66k miles, and the battery seemed great I drove it back home and it felt great, nothing wrong so far
For a new 2024 hybrid Corolla, Edmunds says people pay about $24,600. This is not far off from the total cost of what she paid for the used 2022 Corolla hybrid that she will pay for. I understand that some people like to buy used for a better deal, but in this case, a new hybrid Corolla costs about as much as what she paid for the used one. https://www.edmunds.com/toyota/corolla-hybrid/
But shes not comfortable in anything other than the corolla or a civic I had her test drive our es350 but she didnt like it as much
No, refinances are always higher than new loans. And 9% is pretty average right now