Author Topic: Should I Refinance My Stupid Auto Loan?  (Read 2062 times)

haflander

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Should I Refinance My Stupid Auto Loan?
« on: October 25, 2017, 09:55:24 AM »
Hi mustachians!

I get a lot of stupid "pre-approved" credit card and other loan offers or junk mail. However, this one has me thinking twice. The eye-catching bolded title: "we'll beat your auto loan rate by 2%." Some background...I bought a truck in March 16 with a 60-month loan at 4.54%, so bring on the face punches. It was before I started getting interested in personal finance and FI and MMM, so it was a decision I regret. The original loan of 18,000 is already down to 13,000.

I hear a lot about people refinancing their home but have never heard about doing it for an auto loan, so I wanted to know what you guys think. Let's get into the fine print and # details of my situation.

My current loan is really close to 13,000 so let's just call it that to make it easy for math purposes. 4.54%. Originally 60 months, so currently at about 42 left to go. I'm about to finish paying off student loans, so maybe when I'm done with them I can pay over the minimum on the stupid truck loan, so I can finish well before the original 60 months...who knows. My current loan is with Bank of America, Idk if that makes it better or worse. I bank with them and they offered me a % much better than anyone else would. My credit is good, not great (~700). Yeah, I should probably change banks. Please keep in mind I'm very new to all of this FI stuff and just trying to make changes slowly and be more aware of my choices for now :)

New offer from local credit union...after reading the fine print, the floor minimum they will use for the new loan is 3%. So, closer to 1.5% difference. Not 2%, but still a big difference. Other fine print...pre-approved, obviously. 90 days no payment, but would still accrue interest during that time. I'd probably just pay three times during the initial 90, as usual. "XXCU does not charge application or refinance fees. Vehicle title transfer fees will apply....Membership in XXCU is required."

OK, so my math looks like this.
Current BOA loan 4.54%: 14,085 total
Offered XXCU loan 3.0%: 13,711 total

Yeah, I should look at the fine print of my current stupid truck loan to figure out the fees and fine print for transferring it to a different institution. But besides from that...
Is my math correct? Has anyone else done this, and what was your experience like? Is the $374 difference enough to make you seriously considering switching? Or would it not be worth the hassle for you? What's your threshold for a switch like this? In other words, how much do you need to save for it to be worth the trouble for you? $1? $100? $1,000?

Any thoughts or comments would be greatly appreciated. Thanks!

Dave1442397

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Re: Should I Refinance My Stupid Auto Loan?
« Reply #1 on: October 25, 2017, 02:28:53 PM »
There are usually no pre-payment fees with auto loans, so you should be ok there. As long as it costs you nothing to refi, I'd switch for a savings of (see below) $482 (48 months) or $785 (36 months).

PenFed offers refinancing too - check it out and see where you fall. https://www.penfed.org/auto/refinance

If your car is newer and you could do 48 months, it would be 2.24%, or $283.40 a month, $13,603 total.

36 months would get you to 1.49%, and would cost you $369.47 a month, $13,300 total.

haflander

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Re: Should I Refinance My Stupid Auto Loan?
« Reply #2 on: October 25, 2017, 04:50:53 PM »
PenFed offers refinancing too - check it out and see where you fall. https://www.penfed.org/auto/refinance

I got excited about this, but I looked it up and I don't qualify in any of their govt/military criteria :( The closest I could think of is a relative who's a teacher, but I don't think that's considered a federal employee.

haflander

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Re: Should I Refinance My Stupid Auto Loan?
« Reply #3 on: October 25, 2017, 04:52:40 PM »
Ha, never mind. I just saw the "Other" option that makes you donate to a military foundation to become eligible.

Dave1442397

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Re: Should I Refinance My Stupid Auto Loan?
« Reply #4 on: October 25, 2017, 04:55:19 PM »
PenFed offers refinancing too - check it out and see where you fall. https://www.penfed.org/auto/refinance

I got excited about this, but I looked it up and I don't qualify in any of their govt/military criteria :( The closest I could think of is a relative who's a teacher, but I don't think that's considered a federal employee.

You can join the same way I did, by becoming a member of the National Military Family Organization (it cost me $20). See under "Am I eligible to join?" on this page: https://www.penfed.org/learn/ways-to-become-a-member

Dave1442397

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Re: Should I Refinance My Stupid Auto Loan?
« Reply #5 on: October 25, 2017, 04:55:55 PM »
Ha, never mind. I just saw the "Other" option that makes you donate to a military foundation to become eligible.

There you go :)

JLee

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Re: Should I Refinance My Stupid Auto Loan?
« Reply #6 on: October 26, 2017, 02:15:09 AM »
I have heard that Penfed is unusually picky regarding credit, so keep that in mind - I do love them, though.  I financed a vehicle at $8k last year...the rates are so good it isn't worth paying cash.

bearandmoose

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Re: Should I Refinance My Stupid Auto Loan?
« Reply #7 on: October 26, 2017, 03:57:42 AM »
Also look at Digital Federal Credit Union, aka DCU.  They have "second chance car loans" which are refinancing of existing car loans.  I believe they offer the same rates to everyone (meaning it isn't credit score dependent).

FindingFI

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Re: Should I Refinance My Stupid Auto Loan?
« Reply #8 on: October 26, 2017, 07:07:33 AM »
How are the rest of your finances looking, and is selling the truck and getting something less expensive in cash an even better way of dealing with your stupid truck loan?  Think of how awesome it could feel to get rid of student loans and the truck loan at the same time!

haflander

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Re: Should I Refinance My Stupid Auto Loan?
« Reply #9 on: October 26, 2017, 07:51:26 AM »
How are the rest of your finances looking, and is selling the truck and getting something less expensive in cash an even better way of dealing with your stupid truck loan?  Think of how awesome it could feel to get rid of student loans and the truck loan at the same time!

1. The rest of my finances are good by regular standards, maybe just ok by MMM standards? I make around 60 and just recently moved into the black in net worth. I live in the suburbs of Dallas, maybe you could call it MCOL. No DW to split expenses with, but also no huge expenses like supporting another person who doesn't have a job, or raising a kid. The truck is virtually all of my debt, somewhere between 90-95% of it. The student loans are the only other thing, no credit card or other debt. Check out the post in my sig to dig deeper into my #s. I wanted to seriously start on this stuff back when I wrote that but that past two months have been crazy. New job, big vacation, whirlwind fling, birthday, funeral. But I'm settling back down into life now and creeping around the MMM forum again, so I want to recommit to that journal.

2. Yeah, you're right. I can't argue with you. The stupid truck loan is clearly my biggest financial mistake. But it may be the only major mistake thus far, unless you count "not saving more." Deep down I know I should get rid of it and get something more reasonable. It's...finding the motivation and making the final big jump that's holding me back. It's hard to do it without knowing ahead of time all of the steps I would take to get rid of the truck and exactly how it would happen. There's no good excuse really, just the fear of taking the plunge, I suppose.

ShoulderThingThatGoesUp

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Re: Should I Refinance My Stupid Auto Loan?
« Reply #10 on: October 26, 2017, 07:56:47 AM »
Sell the truck and buy something more reasonable to drive.

frugaliknowit

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Re: Should I Refinance My Stupid Auto Loan?
« Reply #11 on: October 26, 2017, 09:11:48 AM »
Cheaper vehicle is the best path.

Maybe 1% savings and a $13k loan:   Just stirring the shxt around...
« Last Edit: October 26, 2017, 09:14:02 AM by frugaliknowit »

FindingFI

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Re: Should I Refinance My Stupid Auto Loan?
« Reply #12 on: October 26, 2017, 09:12:45 AM »
The stupid truck loan is clearly my biggest financial mistake. But it may be the only major mistake thus far, unless you count "not saving more." Deep down I know I should get rid of it and get something more reasonable. It's...finding the motivation and making the final big jump that's holding me back. It's hard to do it without knowing ahead of time all of the steps I would take to get rid of the truck and exactly how it would happen. There's no good excuse really, just the fear of taking the plunge, I suppose.

The best part is that it doesn't have to be a permanent mistake.  You can still correct it!  My guess is that it won't be half as hard as you think it will, and you might even regret not doing it soon.