Clearlane Auto Refinance Offer

[ridgebackpilot]

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. 

[19eighty5]

Thank you for sharing.

[DaveInAZ]

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!

[ridgebackpilot]

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 :-)