How does this work?

DH is reenlisting this year and we just bought a new truck last year, so we want to put 7,000 or 8,000 toward it and refinance the rest to get our payment down. We've never done this before and really need some advice.

We financed through Toyota, their interest rate was actually slightly better than our Credit Union, if that makes any difference.

Oh, and also, will we be able to keep our current interest rate or maybe even get a better one?

If you aren't going to get a better interest rate then there isn't anything to be gained other than the lower payment. In other words, you will be paying more money just to get a lower payment for a longer time. If you don't refinance, you will keep the current payment but you will pay it off quite a bit earlier than the original date.

Ok, so when you refinance, you are paying off the first loan and getting a new one. So, in effect, you are paying interest on the loan twice. Once on the original loan and again on the loan to refinance? Right?

No. When you pay off a loan, you pay the remaining principal and any penalty. That is the payoff. When you get a new loan you have an interest to maturity - when you pay off the loan. All loans are amortized - each payment comprises interest and principal. As you are closer to the end of the loan, of pay more of the principal. The principal is what you borrowed.

OK, here's the real stry about refinancing a vehicle.

I have been in the Car Sales business for a little over 5 years, so if you have any questions, you can ask me on here or send me an email on my yahoo account on my profile.

As for refinancing your car, there really isn't any reason if you have a good interest rate now. The on'y reason peopl do this is if they had bad credit when they bought the car in the first place and now either made their scores higher or now have a good co-signer.

Your car is now a used car and used cars have higher interest rates.

This is because if you were to default on your loan, the bank is going to have a harder time selling it because it has multiple owners. Even though you are the original owner. That is just the norm.

I would just send the money into the bank and have them apply it to the principal. This won't necessarily lower your monthly payment, but it will certainly lessen the amount of time you have to pay it off and you will save a little interest you were supposed to pay over time.

One question I have for you is can you afford the payments now?

Another important question I have is are you leasing the vehicle, or did you get a balloon payment, or actually finance it over 48/60/72 months?

I know I read that you purchased, but I need to know specifics. To me a purchase means you drove it off the lot. There are a few different ways you can actually pay for it, so that is why I am asking. You were talking about rate, but I just want to make sure. There are a lot of sales people out there that tell the custoer one thing and do a totally different thing. I hat those types.

What srt of car did you get and wat are the terms, ie. length X payments?

Sorry, I did not see this last post.

We bought an '06 Toyota Tacoma in August of '06 with no money down (and actually went upside down in our trade in about 3K) and financed through Toyota at 6.49 for 72 months.

We can afford the payments for now but when my car dies ('97 Chevy Lumina with 152,000 miles), having 2 car payments isn't going to be so manageable especially since I'm a stay at home mom.

We're just trying to prepare for the future. Any advice is appreciated. Thanks in advance.

Advice:

What you haveto think about is how important a second car really is. Do you use your Lumina on a regular basis, or do you only use it every so often? If you only use it two days a week, then it might not be too important to get another car right away. Take some time and save up a little cash for a good down payment on a lease of a new car, or a slightly used car.

Remember, the older the car, the higher the rates, so the higher the payments.

Thinhk about this. You can get a 1-2 yr old used car for the same monthly payment as a three to five year old car. Even if the selling price of the older car is less, the end result will be about the same money after interest. Plus repairs on the older car.

If you need a second car now, then you might want to look into leasing a second car for yourself. Get a little Toyota Camry or even Honda Accord. They usually have a better lease deal than the Toyota Corolla or Honda Civic. But check both of them out.

Then after you have leased the car, you have th option of buying it from the bank. Think about it like splitting up the payments in two phases. This way you can drive a nicer car at an affordable payment.

Thanks for the great advice. We don't plan to get another vehicle until the Lumina dies and even at that point, if we live on post at our next duty station, we could probably get by with 1 vehicle anyways.

When we have to purchase another vehicle I do want to get something 1-3 years old. Any advice on buying used cars?

find out what it is and get the specs. Look in Kelly Blue Book or go to KBB.com and use that as a guide. Be prepaired to hit the dealership about 15% lower than those guides.

Most dealerships use "Galves" to buy cars. That is the book that we use at the auction. Then they mark them up to make a profit. Don't forget that they are in business ot make a little money, so don't bee too stingy. They also have ot make the car look and run nice if needed.

When you start at those numbers, there is a little negotiating between the two of you. Finally you'll meet in the middle and should have an even/fair deal.

I would shy away from buying from an individual because you don't have an recource if there are problems with the car. Unless it's an unbelievable deal and you know the person or something like that.

Ask the dealership if you can take the car to your mechanic to have it looked over. But be aware that the mech might even try to get you to have things fixed by his place, unless you know the guy.

quote:

Originally posted by mrsdlhall:
Thanks for the great advice. We don't plan to get another vehicle until the Lumina dies and even at that point, if we live on post at our next duty station, we could probably get by with 1 vehicle anyways.

When we have to purchase another vehicle I do want to get something 1-3 years old. Any advice on buying used cars?

I have always thought that it would be better to buy from an individual because you would at least know who had driven the car. But what you're saying makes perfect sense. In buying from an individual, if worse came to worse, you'd be dealing with civil court.

Thanks for your time and advice!!

I'm sorry, and I know this has been dormant for a while, but I'm gonna say something here about what I've seen written.

First: for God's sake DO NOT LEASE a vehicle. You'll end up paying more for a lease than if you'd just finance it.

Second: Throwing a chunk of cash on the balance of your account will depend on what kind of contract you have. If you have a flexible finance rate, whatever you send in will be applied to the amount of the finance charge that is due when that money comes in first, then the remainder will be applied to the principal balance.
If you have a 'coupon book' just keep sending in payments as you normally would. If you get a statement each month, you'll need to call the customer service number to get one generated.

Third: 99% of dealerships do not use KBB for their trade-ins. They use NADA. NADA is a more reliable resource than KBB simply because it's more accurate and gives the owner more credit for the options and packages that they have on the vehicle. You can go to nada.com for an accurate look at what you're vehicle's worth--both trade-in value and selling value.

quote:

Originally posted by bobbysangelwife:
I'm sorry, and I know this has been dormant for a while, but I'm gonna say something here about what I've seen written.

First: for God's sake DO NOT LEASE a vehicle. You'll end up paying more for a lease than if you'd just finance it.

Just going to comment briefly as a regular poster because this is not widely known to the Military Community.

Leases are expensive, however you can negotiate a short term lease of 30+ days or longer from Hertz or any other large rental car firm and it is cheaper then renting the car for the same period. Some people are willing to pay that price then to hassle with buying a car and reselling it.

I used to be a traveling business consultant with IBM and we would do this frequently on long-term projects to save IBM and the customer money. Terms of the short-term lease are negotiable to an extent.

It's good to know if ever you ship your car somewhere (do they still do that?) and need a car for a 30-45 day period.

Also, I want to point out that hotel rates are negotiable as well if your staying for a extended period (2 weeks or longer). Don't be afraid to haggle.....they want your business if your a long-term customer and you can save a chunk of change.

BAW-Jen,

"Dormant for awhile" is an understatement. It's been outright D-E-A-D!