Should I refinance my car or purchase another one?

Question

I have a 2006 Honda Civic. At the time I bought it, I was given a 10.25% interest rate on my loan. My credit score has gone up considerably since then and I feel I can get a better interest rate now. I still owe close to $20,000 on my car loan and 18 months has passed by since I bought it originally. I love my car; I even put tinted windows on it! I would like to save some money in interest, though. So, I am wondering if I should refinance or purchase a new one. My bank can give me a 7.25% interest and they say it is the best move. The dealership has already sent me a letter saying "We need your used car!" It goes without saying that the sales rep is dying for me to come in and sell me a car. He also says it is the best thing to do. Whom do I believe? I hope I can get some great advice from you in this matter.

Answer 1

I assume your goal is to lower your payment. First, forget the notion of buying another car. As others have mentioned, you are upside down and you will not be improving your situation.

Second, the difference in APR must be great enough to justify the refinance. 18 months is a long time to have been paying on this note before refinancing. You should understand that although your payment is level, the amount of interest that you pay monthly is not. You have paid more interest in the past 18 months than you will in the next, on the current loan. It would be a close call to determine whether refinancing is a viable alternative. One factor you did not tell us in your question is the current loan term, or the monthly payment for that manner.

If you finance (refinance) 20 grand for 60 months at 7.25% your payment will be a couple of dollars under $400. If that is saving you a hundred bucks a month, it may be worth it. Several others have suggested reducing the term of the loan. That is excellent advice but it may not be reasonable in your case. You can effectively reduce the term by increasing your payment above the minimum. If you paid $450 per month, the extra $50 would be applied toward the principle. On simple interest loans, you pay interest on the unpaid balance each month. So you would pay the car off much sooner but you'd still have the lower monthly commitment to fall back on in tough months.

When you refinance, I would also check your contract for any canceable items that you may not want. These items include, warranty, gap, credit insurance, tire coverage, etc. The refund of these items will reduce the amount of your pay off, thus reducing the amount you will need to refinance. If you want any of these products you can add them to the new loan after you shop for the best price.

Do not trade or buy a new car!

Answer 2

Pretty sure that you might find many financial clarification at: loanhome.info-

RE Should I refinance my car or purchase another one?

I have a 2006 Honda Civic. At the time I bought it, I was given a 10.25% interest rate on my loan. My credit score has gone up considerably since then and I feel I can get a better interest rate now. I still owe close to $20,000 on my car loan and 18 months has passed by since I bought it originally. I love my car; I even put tinted windows on it! I would like to save some money in interest, though. So, I am wondering if I should refinance or purchase a new one. My bank can give me a 7.25% interest and they say it is the best move. The dealership has already sent me a letter saying "We need your used car!" It goes without saying that the sales rep is dying for me to come in and sell me a car. He also says it is the best thing to do. Whom do I believe? I hope I can get some great advice from you in this matter.

Answer 3

I'd refinance it and take the new loan for less time.
Example, let's say you have 52 more payments. Since the new loan will have a lower payment I'd take the loan for 42 months (3 1/2 years) making the payments roughly equal but paying off the loan faster.
You appear to owe more than the car is worth right now, which isn't uncommon with new cars and high interest rates-but makes buying a new one tougher because you have to roll in the difference into the new car, making you even more "upside down".

Answer 4

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RE:
Should I refinance my car or purchase another one?
I have a 2006 Honda Civic. At the time I bought it, I was given a 10.25% interest rate on my loan. My credit score has gone up considerably since then and I feel I can get a better interest rate now. I still owe close to $20,000 on my car loan and 18 months has passed by since I bought it...

Answer 5

You're upside down in the car. Meaning you owe a good chunk more than what it's currently worth. If your car is the EX model and it's clean with low miles, it's probably worth at the most $17,000 (as a private seller) . So your in the red $3,000+.

Do not trade-in, whatever you do. The dealer would try to give you in the neighborhood of $10-12k for your car, tacking on the extra $8-10k you would owe on the loan on the new loan.

Your best bet is to refinance and make some double payments to get caught up on the loan so you're not upside down.

Answer 6

I really want a new car! I have a 2012 Nissan Versa and I have paid on this car for 3 years...never late. The interest was really high so I know that if I trade I am at least $2000 upside-down. What can I do? I don't mind a car note but I would like to have a ride that I truly like!

Answer 7

My advice is to sell your car outright. If you can get at least 16,000 out of it, do that, then get a loan for around 9 to 10,000 and pay your remaining debt on the current loan for the Honda. Take the rest and buy something for cash, and then you have lowered your payments, interest, and you have a vehicle in your name with nothing more than a personal loan basically. Cars are horrible investments. So when the dealer tells you "He wants your used Car!" he is going to pay you a little, sell your car for a lot, then sell you a new one and make double time on your good credit rating. I hope I have helped you a little bit.

Answer 8

You are going to pay 2 cars with that interest rate when a Civic is not worth more than 20k. Refinance. Try to pay as much money as you can in the principal.

You should have calculated how much money you were going to pay when you finish paying... most dealers don't care about the sale, but about the finance.

Answer 9

I think refinancing is the better move.

For starters, you say that you love your car. What else is there to say? Keep it because you probably won't love the next car.

If you trade your car for a new one, how much are they giving you in trade? If they aren't paying off your current loan in full, then it's not worth it. And what is the interest rate for a new car?

If you decide to trade, read the fine print! While they may pay off your current loan in full, they may tack on extra fees and charges for the car to offset that. My experience with car salesmen has been that they will play games and try to get every penny they can.

Answer 10

By ALL means refinance the car. Don't listen to the salesman. Try to refinance for a less period of time as well that way you will OWN the car faster.