How long must you stay with dealer financing?

[rent]

It really depends on what you had agreed to. Here are some strategy. The first two predicate on your having cash to pay off the entire balance.

- If you haven't agreed to making certain number of payments, and the contract has no pre-payment penalty (most don't). Just pay it off the next day.

- If the agreement with your dealer was to make, say 4 payments, but has no other stipulation, pay approximately [loan amount - (3 x monthly payment amount)] as your first payment the day after. Then make 3 more payments and be done with it.

- If the agreement has stipulation preventing you from paying down principal in the first 4 months, then you figure how much interest you would pay (roughly principal * rate / 12 * 4), and see how that compares with the $1000 "saving" you get from the dealer. If it's more, don't take the deal.

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[Big_Lebowski]

Auto loans are simple interest. Lender gets their interest when you finance regardless of how fast you pay it back.

Not true.

Here is simple interest explained.
https://chryslercapital.com/blog/how-a-simple-interest-contract-works

 

[OutlawBeard]

I was supposed to get another $1500 off my deal to take the high rate dealer financing but by the time my order came in they had supposedly stopped doing it, too many chargebacks apparently. I was ok with it though because I'd rather do my own financing anyway.

 

[Vrrooom]

The dealer can ask you to sign a contract, and that is between you and the dealer. If they get charged back the fee paid to them for the loan, they could demand you pay it. FYI, most dealers receive an average of 2% on auto loans, so in essence they're making 1% on the deal and passing 1% on to you. However, that is not a term of the loan between the lender and you.

Do your calculation on what you would pay at your credit union/bank against what they are charging you. And calculate how much that 1% discount saves you. If it is worth it, do it, if its not, ignore the 1% discount and finance it elsewhere. Here is an example:

$60k financed @ 2.5% (assumed good rate at your credit union) for 72m:

$60k financed @ 6% (assumed rate dealer is offering) for 72m:

You can see just over 4 months, the interest paid at 6% in this scenario is $689 more than if financed at 2.5%. If you were receiving 1% off ($600), then paying it off in 4 months, this would end up costing you an additional $89. If you were able to pay it off within 30 days, it would cost you $175 in interest, but you gained $600 by the discount, netting you $425.

So if you have to keep it for 4m or longer, you lose out in this scenario. If you can pay it off right away, you come up a few hundred bucks and it could be worth it. This also assumes you're buying at $60k and financing $60k. However, plug in your own numbers. Here is a good site that gives you the amortization breakdown on auto loans: https://www.amortization-calc.com/auto-car-loan-calculator/

 

[TimInce]

And what is specified in your contract?

 

[GabrielleTucker]

A lot really depends on what is specified in your contract with the dealership. Often the terms of cooperation with them are not the most favorable, so you should carefully read the contract terms.
Fortunately, I was refused when I wanted to get dealer financing because I worked part-time jobs. Subsequently, I realized that I had avoided a whole mess.
As a last resort, I advise you to contact a financial consultant or a lawyer so that he can analyze your contract and accurately answer the question. Good luck!

 

[Deleted member 59498]

I don't do these deals, they generally are not in your best interest. Then I have to refinance which isn't a big deal but it is another credit hit with hard pull and account change etc.

The interest I pay at NFCU is going to be far less then some dealer gray area financing anyway. If you have mid-tier credit it might be worth it, but at my current 2.3% nah. As Vrooom shows above it is just not worth it really. Just not worth 400 or 500 bucks to me if you can even get that far ahead.

 

[carlhenry]

Not ignorant, and not being funny. You agreed to do it to get the $1,000 off.
I live in the world when a man makes a promise he sticks by it.
No one forced you to agree to the terms. Once you got the $1,000 off dont go running home to mama and start crying.
YOU GOT EXACTLY WHAT YOU AGREED TO.

sounds like u have no balls

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