topic Re: Advice needed - Pay off car? Refinance it? Or sell it and buy new car? in Auto Loans

Advice needed - Pay off car? Refinance it? Or sell it and buy new car?

mbauza86 — Wed, 09 Dec 2020 17:07:57 GMT

Hello,

I wanted to get some advice because I just have no idea what to do

I currently have a car loan w/ BB&T and I’m currently paying about $680 a month. I’m planning to buy a house in April 2021 and I want to bring that payment down or get rid of it, so that I can use that extra cash towards the monthly mortgage payments.

Now, I don’t know if I should should pay it all off (19k left), sell it and buy a new car w/ lower interest OR refinance it.

The original Loan was almost 42k @ 5.75% for 72 months. My credit wasn’t when I got the car, but is now so much better.

Here’s the loan breakdown

Car $34,472

Gap $750

Extended warranty $4181

Fees/Taxes/Title/Service $2082

The car is a 2014 Mercedes Benz GLK 350 and w/ 64k miles now. I checked what the value of the car is and it is worth anywhere from 13k-16k.

Would it make more sense to refinance it, sell it and buy a new one car at the lower interest or just pay it off?

Any advice is much appreciated.

Re: Advice needed - Pay off car? Refinance it? Or sell it and buy new car?

Kforce — Thu, 10 Dec 2020 20:37:33 GMT

@mbauza86 wrote:

I’m planning to buy a house in April 2021.
You don't want a new loan within a year of getting a mortgage loan.

Want to bring that payment down or get rid of it, so that I can use that extra cash towards the monthly mortgage payments.
Mortgage loans are 15-30 years, cars short term. If a car payment means you are so close that you need that money for your payments you should be hard thinking buying a house at this time.

Now, I don’t know if I should should pay it all off (19k left)
If you have the money and don't need it for down on house, closing cost, etc, (Yes)

Sell it and buy a new car w/ lower interest
"No new loan".
You could sell it and buy cheap car with cash.

Refinance it.
The original Loan was almost 42k @ 5.75% for 72 months.
The car is a 2014 Mercedes Benz GLK 350 and w/ 64k miles, worth (13k-16k).
That is not really a horrible interest rate on a long term loan. You already have lost the most in depreciation and paid the largest part of your loan interest. I would think about keeping the car, if your profile supports home purchase without selling it. After closing on house refinance.

Good luck

Re: Advice needed - Pay off car? Refinance it? Or sell it and buy new car?

Kforce — Thu, 10 Dec 2020 21:09:19 GMT

@Kforce wrote:
@mbauza86 wrote:
Refinance it.
The original Loan was almost 42k @ 5.75% for 72 months.
The car is a 2014 Mercedes Benz GLK 350 and w/ 64k miles, worth (13k-16k).
That is not really a horrible interest rate on a long term loan. You already have lost the most in depreciation and paid the largest part of your loan interest. I would think about keeping the car, if your profile supports home purchase without selling it. After closing on house refinance.

I calculated the numbers.

42k @ 5.75% for 72 months at the payment with 19k balance = $6,300 interest paid to date.

From 19k to loan end = $1,400 additional interest paid.

You are way past "the point of no return", in my opinion.