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Refinance/Lease/Buy Used

Established Member

Refinance/Lease/Buy Used

So I have been sitting on this for a long time and still have not come to a conclusion. I currently have a 2011 Kia Forte Coupe that I bought with a cosigner back when I was in college. My APR is at 4.74% and I owe ~$9500 on it. Since then, my credit score has gone up (I'm around ~740) and was thinking of refinancing. I've been flipping back and forth between options because I have a lemon and it's past the 2 year limit for the lemon law. So I wanted to just get rid of it and either lease a car or buy a used one. I'm sure I can get a decent amount for my car now, but I don't want my debt to increase if I buy used. I've never leased before but I've read up on it and it seems like a viable option. I was thinking about refinancing because although my car is a lemon, it still has 7 years left under warranty and the problem is crappy electric wiring. I never have to pay for fixes. Also, I'm in the military so I know I can get a good APR from my credit union. But I'm also stuck on an island for another year and a half with no idea where I am going next. My main goal is to just lower my payments (I pay $400/month). I just don't want to screw myself over. Any suggestions?

EQ: 778 (05/17) TU: 767 (05/17) EX: 769 (05/17)

Next goal: 780+ across the board
Message 1 of 8
7 REPLIES
Moderator

Re: Refinance/Lease/Buy Used

I am a little bit biased against leasing. Ok, maybe not a little, but a lot.  Leasing a vehicle makes no financial sense except in very limited circumstances in my opinion.

 

If your goal is to reduce your payments - then consider refinancing. It will get you a paid tradeline plus you get the co-signer off your credit. It will give you a much lower payment because the principal amount is substantially lower. Since your score is 740 now (assuming FICO and not a FAKO type score) you will get top tier. If you refi with a CU then you only get one HP and not multiple HPs.

 

All of these things are good for you. Then when you get to where you are going after your  time on the island you can make a decision to sell your current vehicle or not. Then you will have two paid on time auto tradelines and can get anything you want to get out of the lemon. Just my 2 cents.

 

Message 2 of 8
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Frequent Contributor

Re: Refinance/Lease/Buy Used

Do not lease it is just a waste of time. with those scores I would just trade the car in and get another!

Pre-Ch7 scores low 500's Post Ch-7 Low 600's
Navy Fed Cash Rewards $4.5k Primor $200 Credit One $300
Currently in rebuilding stages.
Message 3 of 8
Established Member

Re: Refinance/Lease/Buy Used

SO10, yes, I was talking about my FICO score. I think I'm going to take your advice and refinance. I felt skeptical about leasing and a lot of my friends said it's a waste of time. For all I know, I won't even be able to keep my car after I leave this island so I might as well keep it and sell it if I have to. Thanks for your help guys Smiley Happy

 

Another question: How long should I refinance for? I currently have a six year loan and I'm three years in.

EQ: 778 (05/17) TU: 767 (05/17) EX: 769 (05/17)

Next goal: 780+ across the board
Message 4 of 8
Moderator

Re: Refinance/Lease/Buy Used


Tal wrote:

SO10, yes, I was talking about my FICO score. I think I'm going to take your advice and refinance. I felt skeptical about leasing and a lot of my friends said it's a waste of time. For all I know, I won't even be able to keep my car after I leave this island so I might as well keep it and sell it if I have to. Thanks for your help guys Smiley Happy

 

Another question: How long should I refinance for? I currently have a six year loan and I'm three years in.


Get the shortest possible time with a payment you can afford comfortably. Look at a 3 yr term at most IMO.

If you end up with a 3% loan for 3 yrs and finance $9500 the payment is approx $ 276/mth. Go to bankrate.com and play around with the auto loan calculator so you have an idea of what your payment will be for a given term at a given rate. Naturally if you can finance for less than 3 yrs that's even better for you.

Message 5 of 8
Established Member

Re: Refinance/Lease/Buy Used

Refinanced at 2.34%
EQ: 778 (05/17) TU: 767 (05/17) EX: 769 (05/17)

Next goal: 780+ across the board
Message 6 of 8
New Contributor

Re: Refinance/Lease/Buy Used

Refinancing was a good move.  Another reason not to lease for someone in the military is the deployment possibility.  If you are deployed while on a lease you are paying for not using a car.  If you buy and finance a vehicle you are paying down the loan while not putting miles on the vehicle.  Generally speaking good for equity building or making sure you own more than you owe.

Message 7 of 8
Moderator

Re: Refinance/Lease/Buy Used


Tal wrote:
Refinanced at 2.34%

^^^Yea! What a great rate for a used car. Congratulations! Smiley Happy

Message 8 of 8