Author Topic: Refinancing my car is costing me more??  (Read 1106 times)

cazio

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Refinancing my car is costing me more??
« on: November 20, 2019, 11:21:08 AM »
Iím currently in the process of refinancing my 2016 Honda Civic. Currently have ~$11,870 left to pay. Current APR is 6.1%, 54 months left to pay.

New loan is offering 4.24% APR over 48 months. Plus gap protection ($895) and a $300 service fee. I can drop the gap coverage as Iím pretty sure my insurance already covers me for a total loss and I wouldnít be buying a car more expensive than the one I currently have.

But doing the math (which could be wrong) Iím coming out with a total cost of $13,262 for the new loan, but actually $13,561 with the service fee. Total cost of my current loan is $13,600.

Am I missing something? If this is right then I donít want to go forward with a new loan to save $40.

v8rx7guy

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Re: Refinancing my car is costing me more??
« Reply #1 on: November 20, 2019, 11:28:40 AM »
I'm getting $13,226 for your new loan with the service fee (might be more if you're rolling the service fee into the loan).  What is your current monthly payment (principle & interest)?
« Last Edit: November 20, 2019, 11:31:55 AM by v8rx7guy »

RWD

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Re: Refinancing my car is costing me more??
« Reply #2 on: November 20, 2019, 11:35:32 AM »
I get $13,226 (paying service fee upfront) or $13,253 (rolling service fee into loan). So savings should be ~$350. Are you sure you didn't count the service fee twice or something?

Yeah, definitely don't get GAP coverage, it's completely worthless when the value of the car is more than the loan (which is definitely the case here).

cazio

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Re: Refinancing my car is costing me more??
« Reply #3 on: November 20, 2019, 01:09:42 PM »
@v8rx7guy current monthly payment is $259 + ~$50 in interest per month. Typically my payment comes out to $315ish. But actually now that Iím looking at my payments itís showing that the $259 includes interest... 🤦‍♀️ I always pay the $259 + the current interest balance.

@RWD Not sure if itís rolling into the loan but it looks like it is. They certainly didnít say anything about an up front charge. Iíll get GAP removed, seemed kinda iffy to me to begin with.

Iíve attached a photo of the breakdown they sent me, for reference. Iím still confused and feeling like this whole process isnít actually going to help me if Iím sinking $300 just to change the loan. Maybe thatís just my lazy brain not wanting to make an effort!


RWD

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Re: Refinancing my car is costing me more??
« Reply #4 on: November 20, 2019, 01:18:07 PM »
Yup, the fees (and GAP) are getting rolled into the loan. Assuming you decline GAP your payment will be ~$276 and total cost of the loan will be $13,263.

I should note that when I refinanced my car at our local credit union that I did not have to pay any fees at all. And you should be able to get a better rate too. The same credit union is currently advertising 2.59% for a 48 month loan on a used car (with A+ credit). You may want to shop around.

Here4theGB

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Re: Refinancing my car is costing me more??
« Reply #5 on: November 20, 2019, 01:44:36 PM »
How is your credit?  That rate is not good and I wouldn't pay fees to refi a car either.

cazio

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Re: Refinancing my car is costing me more??
« Reply #6 on: November 20, 2019, 02:11:26 PM »
Honestly Iíve been feeling the same. My FICO score is 790 but when they did a soft credit pull for this bank it was 707 (I assume different credit score). Not really sure why my credit would be that low.

When I shopped around this was the lowest rate I could find, it still seemed high to me but I canít seem to find something lower. This bank has already done a hard credit pull so my score just got docked again. :/

@Here4theGB j agree. A $300 service fee seems hefty to me, I donít like sinking that much money in for nothing.

Dicey

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Re: Refinancing my car is costing me more??
« Reply #7 on: November 20, 2019, 02:14:55 PM »
Keep shopping. Try local banks and credit unions. Those fees are bullshit.

robartsd

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Re: Refinancing my car is costing me more??
« Reply #8 on: November 20, 2019, 02:39:49 PM »
@v8rx7guy current monthly payment is $259 + ~$50 in interest per month. Typically my payment comes out to $315ish. But actually now that Iím looking at my payments itís showing that the $259 includes interest... 🤦‍♀️ I always pay the $259 + the current interest balance.
Yes, the $259 includes the interest. Most fixed rate loans are scheduled with monthly payment that stays fixed for the life of the loan; current interest is deducted from the payment and the remainder is applied to the principal. Sounds like you've been making extra payments on your car (but that was not a bad choice with a guaranteed return of 6.1%).

v8rx7guy

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Re: Refinancing my car is costing me more??
« Reply #9 on: November 20, 2019, 03:01:03 PM »
@v8rx7guy current monthly payment is $259 + ~$50 in interest per month. Typically my payment comes out to $315ish. But actually now that Iím looking at my payments itís showing that the $259 includes interest... 🤦‍♀️ I always pay the $259 + the current interest balance.

@RWD Not sure if itís rolling into the loan but it looks like it is. They certainly didnít say anything about an up front charge. Iíll get GAP removed, seemed kinda iffy to me to begin with.

Iíve attached a photo of the breakdown they sent me, for reference. Iím still confused and feeling like this whole process isnít actually going to help me if Iím sinking $300 just to change the loan. Maybe thatís just my lazy brain not wanting to make an effort!

From my calculations, looks like adding an extra $60/mo to your car loan will also save the same $350 over the life of the loan without having to do the refi  process

cazio

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Re: Refinancing my car is costing me more??
« Reply #10 on: November 20, 2019, 03:05:06 PM »
Thanks everyone! Back to square one, I guess. I saw some better rates with local credit unions (for some reason the quote website I was using didn't seem to include those) so I'll start the search there. Adulting sucks haha.

@RWD The credit union that looks like it will have the best rate (2.38% for good credit) is requiring a membership application first before I can find out what the loan would be. Were you already part of the credit union when you applied? I don't want to fill out a bunch of membership applications just to get a quote. :/

@v8rx7guy Good to know. Since I've pretty much already been doing that anyway, I'll just bump it up some more and plug along unless I find a much better rate.

Duke03

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Re: Refinancing my car is costing me more??
« Reply #11 on: November 20, 2019, 03:11:34 PM »
Check out rbfcu.org  They are a Texas credit union that can't be beat.  FYI they will do a loan anywhere in the country.  Right now you can refi that car for 2.95% and their gap is about $400.  $895 for gap is highway robbery. I'd bet money that you're not even upside down on that car now so I wouldn't even worry about GAP.
« Last Edit: November 20, 2019, 03:13:56 PM by Duke03 »

RWD

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Re: Refinancing my car is costing me more??
« Reply #12 on: November 20, 2019, 03:13:16 PM »
Adulting sucks haha.
Truth.

@RWD The credit union that looks like it will have the best rate (2.38% for good credit) is requiring a membership application first before I can find out what the loan would be. Were you already part of the credit union when you applied? I don't want to fill out a bunch of membership applications just to get a quote. :/
I was not already a member when I applied. Was pretty straightforward to join and was also free.

Check out rbfcu.org  They are a Texas credit union that can't be beat.  FYI they will do a loan anywhere in the country.  Right now you can refi that car for 2.95% and there gap is about $400.
But don't get GAP, regardless of price.

robartsd

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Re: Refinancing my car is costing me more??
« Reply #13 on: November 20, 2019, 03:30:52 PM »
@RWD The credit union that looks like it will have the best rate (2.38% for good credit) is requiring a membership application first before I can find out what the loan would be. Were you already part of the credit union when you applied? I don't want to fill out a bunch of membership applications just to get a quote. :/

The car my wife had when we got engaged was purchased with a loan from a credit union. She joined the credit union to get the loan. I wouldn't apply to several credit unions, just the one (or three) that looks like the best option.

cazio

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Re: Refinancing my car is costing me more??
« Reply #14 on: November 20, 2019, 03:42:49 PM »
@Duke03 Awesome. They have the option to apply to a loan before joining, so I'll be taking advantage of that!

@RWD Thanks! I don't think I'll be getting GAP, so all good there.

@robartsd Will do, thanks for the advice!

So glad I have the MMM community as a resource. My dad has always been my touchpoint, but he doesn't have the MMM mentality (yet has ended up with many of the perks anyway haha). Running the numbers isn't really something he does, so it's super helpful to be able to ask mustachians! Thanks everyone!

Duke03

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Re: Refinancing my car is costing me more??
« Reply #15 on: November 20, 2019, 03:49:10 PM »
@Duke03 Awesome. They have the option to apply to a loan before joining, so I'll be taking advantage of that!

@RWD Thanks! I don't think I'll be getting GAP, so all good there.

@robartsd Will do, thanks for the advice!

So glad I have the MMM community as a resource. My dad has always been my touchpoint, but he doesn't have the MMM mentality (yet has ended up with many of the perks anyway haha). Running the numbers isn't really something he does, so it's super helpful to be able to ask mustachians! Thanks everyone!


Try them out.  They are awesome.  I've been a customer for 20 years and they have never done me wrong.  When you get approved for the loan they will open you a savings account for like $5 so you can become a member then. They always have the lowest rates in the country also.