Today I received an offer in the mail from Clearlane to refinance my auto loan. Apparently they're an arm of Ally Bank. I've already refinanced my loan with Chase, but I thought others might be interested in their offer. Here's what it says:
"Congratulations! You've been PRE-APPROVED to refinance your current auto loan. Clearlane works with a network of loan providers to help get you the best rate possible."
While that sounds good, their offer is somewhat deceptive. They got my old loan right: 7.79% and monthly payment of $578. They offer a new rate of 4.14% APR and a monthly payment of $450. That's a monthly savings of $128. Sounds good, right?!
Except that my old loan had a remaining term of 48 months. But Clearlane is offering a term of 60 months, which naturally helps lower the monthly payment. While I'd pay $3,969 in interest on the old loan, Clearlane is offering me the opportunity to pay $2,583 instead, a savings of $1,386. However, if I refinance at the offered rate and keep the term to 48 months, I'll pay only $2,061 in interest ($538 monthly) for a savings of $1,908 over the remaining life of the loan. Which is essentially what I got when I refinanced earlier this month.
The motto is: Look carefully at an offer like this (beyond the attractive monthly payment) to see if you can save even more than they're offering. These offers often make apples-to-oranges comparisons (48 v. 60 months) that make them appear to be better than they really are.
Thank you for sharing.
Yep, good info, thanks for posting. Sounds like you use a loan amortization app? I use Excel alot so I loaded an amortization add-in to it.
I got a good deal on a low mileage 2016 Mazda CX-3 in Sept. 2017. I had a pre-approved loan from a small local credit union for 60 months at 3.45%, but the dealer insisted on pulling my credit report. When I got to the finance guy he kept trying to push me into a loan with Wells Fargo for the same terms, I had to be firm and tell him no, I don't like Wells Fargo and want stick with my CU loan. This was late Friday afternoon before the Labor Day 3 day weekend. Tuesday the finance guy calls me and says my CU didn't respond 'fast enough' for him so he sent the loan to Wells Fargo. I started to protest and he reminded me I had signed a Power of Attorney so he could do what he wanted.
OK, so now I'm p!ssed, but I don't get mad, I get even. I figured Wells probably was giving them a better kickback so I looked into refinancing at Penfed & DCU. DCU came back with the better offer, 2.99% for 65 months. I checked my amortization Excel app, for the extra 5 months term the payment was naturally lower, but even with the 65 month term I saved over $500 in interest. So worthwhile to check an amortization app for loans.
And DCU works fast, they transferred loan in under 2 weeks. The finance guy actually called me, irritated, asking why I refinanced so quickly. I said: "I told you I don't like Well Fargo, and you didn't give my credit union a full day to get back to you. I'm guessing Wells Fargo pulled back your loan origination commission? Good, don't try to push loans they don't want onto folks". Click!
Great story, @DaveInAZ! I can't stand Wells Fargo either, based on the way they've treated me and my mortgage. Way to teach that finance manager a lesson!
Amortization tables (or a loan calculator with amortization) are important tools. Whenever I consider a loan at any APR, I always calculate the total amount of interest I'll be paying. At higher rates, the cost of the loan can be staggering!
This winter I was approved for my first 0% APR auto loan, and for 72 months. It was subsidized by the manufacturer (Ford). Gotta love that rate; the amortization calculation is easy! The way I figure it, I'm buying their car so why should I have to pay them for a loan as well?! LOL :-)