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Established Contributor
masscredit
Posts: 721
Registered: ‎07-17-2012
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Looking for a lower rate. Refinance or get another car?

i bought my current car ('09 Cobalt) in Sept of '11.  I had a BK, some tax liens and a score of 520 when I got the loan from Cap 1. It has a 17.1% rate. Payment is $283. per month for 72 months. I tried to refi last Summer but got shot down by a number of banks becaues of my past credit. My scores were in the 650-685 range depending on the CRA.  I now have more credit and am starting to get auto-CLIs.  I've been wondering if I should just trade the current car in for something newer. I have a feeling that banks would be more likely. I can buy something like a 2012 Chevy Cruze. I'll probably be a little upside down if I trade my car but they can probably play with the numbers to make it work.  I'm figuring if I finance $18k for 72 months with a 6.9% rate, my payment would be $306. per month. A lot more money would be going towards the car instead of to interest so I'll actually be getting more of something for my money. 

 

Do you think I'm on the right track with this?

 

 


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Dustink
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Registered: ‎10-02-2012
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Re: Looking for a lower rate. Refinance or get another car?

[ Edited ]

It sounds like you have lots of negative equity? What is the trade in value of your car and how much do you owe?

 

I strongly advise against a 72 month loan. It just get's you into a higher rate and a term longer than you are likely to own the car.

 

6.9% is still very high. 

 

I would suggest you pay off your negative equity, save up a down payment. Then find something affordable that you can get with a 36 month term. A Nissan Versa comes to mind. If you came up with $5,000 down and negotiated well, a Versa SL would be under $300 per month for 36 month's.

Too many INQs & low AAoA so I'm off to tend the Garden.     Age:21    


     $14k          $8.5K          $7.5k          $7.5k         $6.5k             $6k             $5k            $5k             $5k              $5k           NPSL       @ 0%
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masscredit
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Re: Looking for a lower rate. Refinance or get another car?

On a retail level, it's listed at about $500.00 over what I owe but on the dreaded trade-in, the car is listed at about $3k less than I owe on it.  Private party closes that gap by about $1500. - $2000.  The difference between 60 and 72 months for this loan was 1%.  Somebody would have to die and leave me a lot of money for me to come up with enough to pay down my negative equity plus come up with $5k down, that sounds like a winning lottery ticket tossed in. 

 

I've driven a Versa but wasn't feeling it. Have narrowed my choice down to a Chevy Cruze if I was to get something. A little bigger than what I have now but still gets 35-40+ MPG. 

 

I understand why you suggest that but financially, it's not going to happen.  Running the numbers, if I go into a new loan for $18k for 6 years at 4.9%, I'd have a payment of $289.00.  Right where I am now but most of my payments would be going towards the car instead of towards interest.  

 

If I can just refi and get away from the current high interest rate, I'd do that and get the balance down but I got shot down last Summer. Tried my credit union that might not like me because they foreclosed on a $500k house in '09. Tried AAA with no luck and the same with another local bank.  I figured I'd be more likely to be bought if I'm getting a car. The dealer would know the banks to get it to go through and if I did eat a little on the trade, I'm still getting more on the other end. 

 

Maybe I'm wrong but just my thinking right now. 


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Dustink
Posts: 2,980
Registered: ‎10-02-2012
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Re: Looking for a lower rate. Refinance or get another car?

If you roll in negative equity and take out another 72 month loan. You will just get deeper and deeper into negative equity. Is your DTI high? Maybe you need to take a look at your budget and see what is causing the financial struggle. No matter what you get into, you need to make larger payments. Your auto loan needs to be a higher priority in your financial life.

 

Maybe you need to find a cheaper vehicle. What about something a few years old with some miles? I would suggest you shy away from the american cars, they seem to depreciate fast. If you buy something that will holds it's value well, it will give you a chance to get your negative equity paid off. Something like a used VW TDI will depreciate slower.

Too many INQs & low AAoA so I'm off to tend the Garden.     Age:21    


     $14k          $8.5K          $7.5k          $7.5k         $6.5k             $6k             $5k            $5k             $5k              $5k           NPSL       @ 0%
Established Contributor
masscredit
Posts: 721
Registered: ‎07-17-2012
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Re: Looking for a lower rate. Refinance or get another car?


Dustink wrote:

If you roll in negative equity and take out another 72 month loan. You will just get deeper and deeper into negative equity. Is your DTI high? Maybe you need to take a look at your budget and see what is causing the financial struggle. No matter what you get into, you need to make larger payments. Your auto loan needs to be a higher priority in your financial life.

 

Maybe you need to find a cheaper vehicle. What about something a few years old with some miles? I would suggest you shy away from the american cars, they seem to depreciate fast. If you buy something that will holds it's value well, it will give you a chance to get your negative equity paid off. Something like a used VW TDI will depreciate slower.


I understand. I was just looking at it as a lower interest rate loan and more money actually going towards the car instead of towards interest. My monthly payment is $283.00, I pay $295.00. Not a big amount extra but everything helps.  With that said, about half goes towards interest so the loan is slowly going down.  My bills are paid monthly and I have spending $. Not living the good life but everything gets paid before it's due.  

 

I guess there are 3 options - 

 

1 - Keep paying like I am now. The car will be paid off in about 4 1/2 years and will have about 160k miles on it.  Probably worth about $2k then. After that it's start over but my credit will be much better.

 

2 - Go the route that I'm thinking about (newer car, lower rate). I'll have a larger loan but more money will go towards the car.

 

3 - Try to come up with an extra $150.00 per month to put towards the car.  If I do that, and keep the car until the loan is paid off, it will be done in 2 1/2 years. And if I do that, I might be able to get to a point where I have positive equity, my score will be higher and I should be able to refi at a lower rate to pay it down or off sooner. 

 


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StartingOver10
Posts: 4,076
Registered: ‎03-06-2010
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Re: Looking for a lower rate. Refinance or get another car?

[ Edited ]

Option 3, IMO

 

You might be able to refi in another year if you do option 3. Sell some things around the house and put as much money toward the loant as possible to close that gap or even generate some equity. Check with other cr unions to see if they will refi you now. They all have their own criteria, some are encouraging auto loans others aren't.

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dabrian
Posts: 321
Registered: ‎12-10-2012
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Re: Looking for a lower rate. Refinance or get another car?

Financial wise its option three by a landslide. Rolling over negative equity into more negative is never the right answer, Unfortunately I learned this the hard way several years ago with the purchase of a new KIA in 2006.
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merlin
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Registered: ‎02-12-2008
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Re: Looking for a lower rate. Refinance or get another car?

Have you looked at Credit Unions? They have great rates and it often doesn't matter whether it's a new car, used one, or refi. I had a car with three years left on the loan and refi'd last fall into a 3 year loan at 1.49%. Hard to beat that!

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webhopper
Posts: 7,230
Registered: ‎09-16-2011
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Re: Looking for a lower rate. Refinance or get another car?

You should check with credit unions such as DCU where you will probably get better than 6.9.

I don't usually advocate getting a new car to get out of the rate on your older car... It would actually not be a good thing to do that.

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Established Contributor
masscredit
Posts: 721
Registered: ‎07-17-2012
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Re: Looking for a lower rate. Refinance or get another car?

[ Edited ]
DCU, is that Digital Federal Credit Union? They are in my state. I tried my credit union last Summer but was denied. Don't know if I am blacklisted by them because they foreclosed on a $500k house in '09. Also tried another local credit union without success along with a bank through AAA that listed good rates. I rather refi then be able to bring the balance of just over $10k down a lot quicker. If I did get into another car, I'd be close to doubling the balance which I rather not do.

I had a BK in Feb of '10 and have 4-5 tax liens that aren't going anywhere. Besides that, 100% on time payments since the BK. Scores and current credit in my signature. If you have suggestions for other places that I show try, I'd appreciate them.

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