Well I just got the call, my car is in. After anxiously waiting for so many months I actually wish it came in a little later. The weather here in NJ is horrendous and interest rates are dropping.

I have checked current loan rates and my credit union is at 7.5 and eloan is 7.06. Does anyone have some advice on where to get the best rates. Does anyone think that the rates may drop more in the next few days given the fed move last week? Any advice would be sincerely appreciated.

 

I think mortgage loans will drop, but the auto loans, no idea. A friend of mine bought a car back in april of last year and got it at 6.7%. As for myself, the s2k is at 7.5% through my local credit union.

 

[QUOTE]Originally posted by FURIO G:
[B]Well I just got the call, my car is in.

 

The credit manager at the dealer is out of the office today but I'll check with him tomorrow. Are Honda's rates usually competitive?

 

The amount they may drop or rise in the next few DAYS really won't change your payments to any significant degree. Just shop around a bit, look for the best price/service mix that fits your available time for loan shopping, then close. My credit union is posting a rate of 7.75% for up to 66 mos payback period, so if you found something close to 7%, go for it.

 

The previous statement about any short-term potential change in interest rates is VERY accurate.

Using the capital recovery formula (for simple interest) to determine your monthly payment:

i(1+i)^n
-------- * ($ Amount to be financed)
((1+i)^n)-1

where: i = (interest rate)/12 (i.e. .075/12=.00625 or .08/12=.006666)

n = # months to be financed

It becomes obvious that minor changes in the rate, such as a quarter or half point, will only change your payment by 10 or 15 dollars per month. . . Shop around but don't lose sight of the big picture. . . Also, most institutions offer lower rates (by usually a half point) to individuals that have there monthly payment withdrawn via direct deposit.
HOWEVER, the real key to SMART financing, is to prepay (pay more than your monthly payment) monthly. ESPECIALLY early in the loan. This will reduce your interest owed and time of repayment significantly

good luck

 

[QUOTE]Originally posted by JRM:
[B] [QUOTE]Originally posted by FURIO G:
[b]Well I just got the call, my car is in.

 

I financed some of my Stook last week for 7.05% for 36 months. I applied through peoplefirst.com and was approved in less than 10 minutes. They overnighted me a check and within 24 hours I was at the dealership. Easy as can be.

 

i bet that i'm showing my ignorance here, but i was under the impression that car loans were for the most part simple interest, and not compounded. if that is the case, is there really any signifigant gain to be had by consistent prepayment? the finance charge should be flat, and whether you pay it off now or in five years shouldn't affect it's valuation.


fotch (ixoye)

 

fotch,

To answer your question, YES there would be a significant difference resulting in prepayment. . .

Yes, car loans are almost always simple interest.

Regarding the finance charge, it is a flat fee. HOWEVER, that flat $ amount is based on your carrying the loan to completion (i.e., paying off a 36-month loan in month 36).

By prepaying a loan, you are effectively turning a "x" month car loan into a "(x - y)" month loan. The difference, your finance charge would drop, thus reducing the Present Value (Present Worth) of your loan.

An example: Let's say you borrow 27,000 over 5 years (60 months) at 7.5%: Your monthly payment would be $541. Present Worth would be $32,460 ($27,000 for the car & $5,460 in finance charges). However, if you decide to prepay an additional $159 per month (monthly payment now becoming $700) your loan would be paid off in approximately 44.5 months. The Present Worth would be $31,150 (with $27,000 for the car and only $4,150 in finance charges). A reduction of 15 months in your loan period & a savings of $1,310.