Hi all - so I recently got pre-approved by my Credit Union for an auto-loan, but while at the BMW dealership, they gave me a better rate by a few percentage points. It was significant enough and made a difference on my monthly payment for me to go ahead with the internal BMW financing. Also, it was Sunday and my bank was closed to try and negotiate. Needless to say, I got a good deal and drove the car home happy.
Then come Monday, I called my CU to essentially let them know I was dissapointed that BMW could come in lower than them. MY CU is usually always the lowest rate given my FICO. And after talking to them, they've come back and beat BMW's rate by a little, so now I'm really considering taking their new rate and keep all my financing with one bank.
So BMW is at 6.39% and my CU is offering 5.99% for this auto loan.... technically, I've already purchased the vehicle through BMW, and would need to wait for the bank paperwork and DMV registration to be processed (2-4 weeks), before I could turn around and give the business back to my bank... but the question is how do the credit bureaus see this? And what are your general thoughts on doing it so quickly?
Should I wait to refinance with my CU for a few months, 6mos, year? How can this impact my score?
Typically I recommend holding on to anything for at least six months:
- Everything under that is a short-term loan and may or may not have some penalties FICO wise; certainly 6 months appears to be a bump for FICO on any given tradeline
- You sorta look like a flake to every other lender who views your credit report in doing this for the next 10 years
That said, I think for car loans if the interest rate difference is such that it matters to you over six months, then refinance; however, with the paperwork involved make certain a payment doesn't get missed with BMW. Personally I wouldn't sweat a .4% difference, and I think there's some value (may just be perceived I admit) to having a diversity of lenders on one's credit report. In the Internet era, having all loans through a single financial institution really doesn't offer the same benefits it did 30 years ago.
The cost and time to re-fi may not be worth the .4% you will gain in the re-fi.
My suggestion would be to pay an additional $5-10 per month above the monthly payment, and pay off the loan faster then planned. This will save you more then the .4% re-fi and make you attractive to other lenders when reviewing your payment history.
Always get an "Option Contract" when you finance a car, unless you are pretty certain you're all good rate-wise. First review the contract you have and see if there are dates on there. I think it's an addendum that most dealerships would add saying, specifically, that you have an Option Contract. They usually can range from 3 to 10 days, which allows you to bring in any other method of financing within that time frame, but you will default to the approved financing method if not.
You could call the dealership and ask, but they might lie. They probably get some "back-end" money from BMW Finance for every loan they kick over, and would get none if you brought in your own financing.
On a side note, having those premium car finance companies on your CR enhances your profile to lenders. The credit card companies etc buy marketing lists from the bureau, and (believe it or not) some of the criteria they use is what type of banks are on your report. Having a MB or BMW or other high-line outfits might get you offers that you otherwise would not. Chase might send you sweetened offers for the Sapphire Preferred as opposed to the Freedom (tailored for you) assuming that you have more disposable income and like travel rewards. Or maybe Amex sends you one of the infamous 100k MR point Platinum invites. Not saying that other things don't matter, but I know from my own experience (and working at corporate for a huge bank for a lonng time) that this "proile" thing is true. Is it worth paying extra for? Your choice. If it rounds out to an extra $80 in interest over the life of the loan, maybe it's nothing to worry about. If it's $800, maybe not worth it for most.
I tried to do the same with my vehicle loan and found that the tax, title, warranty and other fees put me over the loanable value for the vehicle. I have to wait to pay it down a little first. Good luck to you.
Thank you all for the responses... given what's been said, I'll stick with the BMW financing as it will only add very little over the length of the loan (also less headache, paperwork, etc) and will be more attractive in terms of credit it seems.
I would think it depends on how much better the new rate is. I used my good credit to refi my mom's new car less than a month after she bought it.
Dropped her rate from 6% to 1.99%. Seemed worth it.