Re-financing car question - to extend the loan or not?

[fouroheight68]

Hi all,

I purchased my truck in 2010 and financed for 5.5% for 72 months. I have excellent credit, and at the time that was a good rate. I now have 36 months left on the loan, and as interest rates have significantly gone down, I'm looking for easy ways to cut some expenses. I was approved to refinance my truck for 2.79% for 36 months, or 48 months (same rate). Here is how the math breaks down:

Current: 36 months left at 5.5%, payment is $379, 35 mo left, for a total of $13192 over the life.

36 month refi: 2.79%, payment would be $353, total of $12,708 over the life

48 month refi: 2.79%, payment would be $269, total of $12,912 over the life

 If I refi for 36, I save $26 a mo and $484 over the life of the loan. If I refi for 48, I save $110 a mo and $280 over the life of the loan. I wouldn't normally advocate extendeding the life of any loan, but in this case, am I better off making my $110 savings for the next 3 years (although a hit on the last year) work for me in other ways? Interest is so cheap!

[StartingOver10]

If you are looking to streamline your monthly obligations, I agree that it is the wise course of action to extend over 48 months if the costs to refi are the same and the interest is the same. JMO. You certainly will have a much better payment and you can always add to your payment if you want to pay it off earlier.

[Dustink]

I always think the best idea is to get the longest term for the lowest rate. Then pay more than the minimum payment when possible. Also, making payments multiple times throughout the month instead of just one payment cuts down on interest charges.