Paying off a car loan early.

EPCrew

Senior member
Jun 2, 2000
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I recently went to check out a car at the dealership and got myself into the whole negotiation mess with a saleman and his manager. I tried asking them this same question and got two very different answers.

If you sign a finance agreement for x% and y years, are you locked into the final total regardless of whether or not you pay the loan off early? In other words, am I still paying the full interest amount if I decide to pay the loan off in full after I drive the car off of the lot?
 

Oceandevi

Diamond Member
Jan 20, 2006
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most often its simple interest and can be avoided by paying off early. They will try to avoid this by sending you zero balance bills when you overpay.

 

EPCrew

Senior member
Jun 2, 2000
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There is no loan as of yet. I just wanted to know in advance since they couldn't answer me themselves.
 

ElFenix

Elite Member
Super Moderator
Mar 20, 2000
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i don't think even the ones with prepayment penalties are so steep as to make it the same total nominal amount as if you'd continued making your minimum monthly payment.

i wouldn't be surprised if the manager and salesperson had no idea what you're asking. you should read the finance contract (it's a pre-printed form, so ask for one) and see if there is a prepayment penalty. i doubt there are many factory loans that have prepayment penalties.
 

Special K

Diamond Member
Jun 18, 2000
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Mine doesn't have a prepayment penalty, but I had to call the bank to make sure, as the generic receipt for the financing terms said there *could* be a prepayment penalty, and that I should call the bank to make sure.
 

FoBoT

No Lifer
Apr 30, 2001
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if you get a 0% loan like i did on my wife's Saturn, then it doesn't matter!

it is really cool that my balance goes down exactly the amount i pay and it doesn't go up
 

LS20

Banned
Jan 22, 2002
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i financed from credit union, so it has no prepayment penalties. what happens with my deal is that interest is assessed daily on the principal. when they compute a payment plan, it is assuming that you make constant XXX payment every month.

so if you pay EXTRA, or you pay EARLIER, it IS helping you in lowering the interest charged. (the rate is the same, its just from a lowered principal)
 

Imdmn04

Platinum Member
Jan 28, 2002
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Check out the amortization schedule.

The bulk of the interest over the entire loan period is paid within the first two years (say, if you got a 60months loan). It might actually not be worth it to pay off early if you have already past that point (meaning, the point where the bank already made most of their money on the loan).

 

RossMAN

Grand Nagus
Feb 24, 2000
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Overgloc

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Nov 2, 2003
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jlee

Lifer
Sep 12, 2001
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Originally posted by: Overgloc
Originally posted by: RossMAN
Originally posted by: Journer
Originally posted by: RossMAN
Unless it's a "rule of 78's" loan (which I doubt) it's simple interest.

Principal + per diem (daily interest) = payoff amount

http://www.in.gov/dfi/educatio...niLessons/rule78vs.htm

http://www.carbuyingtips.com/finance.htm

i just learned that the other day in my accounting class...i feel smart like ross now :D! haha

But you're from Abalama :confused:

LMAO

I haven't literally laughed out loud for anything on AT in a long time... :laugh:
 

RossMAN

Grand Nagus
Feb 24, 2000
78,794
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Just for the record I purposely spelled it Abalama, it's an inside joke on Ventrilo ;)