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Short term financing car
Old 06-12-2017, 04:32 PM   #1
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Short term financing car

Darn! I was trying to push my 15 year old car for 2-3 more months awaiting the sale of my Mom's old house. It died, and now I have to get a car and use financing (I really wanted to come in with cash in hand this time!) However, I will pay it off in 2-3 months, so does it really matter where I get the financing? I know the dealer isn't the best choice, but what could it mean, $50? I don't think I want to run around shopping for financing when it's only for 2 months! Should I go for a short or long term in this situation? I'll have enough money to use as a down payment to look substantial.

This car may be the last car I buy! I'm going to make sure i like it. This is part of all the milestone events happening in my final year of work.
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Old 06-12-2017, 04:42 PM   #2
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In this low-rate environment if it is for a short time it probably won't be worthwhile to spend a lot of time trying to scrape off the last fraction of a percentage off the interest rate. I'd ask the dealer what their interest rate is, telling them ahead of time that you're going to check with a few other places (bank, credit union, etc.) to give them an incentive to lower their rate.

Back in 1985 I financed a new pickup truck. (In hindsight not the smartest move, but hindsight is 20/20.) I had asked the salesman what their interest rate was and he said something like 15%, so I financed through the credit union at 12%. When I picked up the truck the finance guy said "We could have got you 4%".

Well, ya should've said so the first time. Maybe they could have, maybe not, but I kept the loan at the C.U. because I trusted them more.
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Old 06-12-2017, 04:49 PM   #3
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my state (NY) has a provision of no early pay off penalty, its the law.. Not all states have that. So first ensure you live in a early payoff no penalty state. We tried to buy a car all cash. We got a better deal by financing the car, then when we got the first bill/statement we went to chase bank (the dealership arraigned the loan with them) and paid it off. Cost us about 53 dollars in interest and there were NO bank fees and all that loan fee stuff in the initial loan agreement. i think we saved 1300 bucks off the cash price.

There are a couple of different ways a lender imposes a prepayment penalty. One type is very direct, and therefore easy to identify if you are aware of its existence and examine loan documents carefully. These are percentage penalties, in which the borrower is charged a certain percentage of the balance remaining on the loan if he or she pays it off early. The amount of the penalty, therefore, would be lower the longer you've had the loan.

These penalties are allowed in 36 states, although they are prohibited around the U.S. for loans longer than 61 months (over 5 years). These penalties must be disclosed in the loan documents, in accordance with truth in lending practices, so read your loan documents carefully and refuse to sign any loan that includes a prepayment penalty. Watch carefully for any of these phrases in the loan documents: prepayment penalties, pre-computed loan, full amount of interest.
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Old 06-13-2017, 03:08 AM   #4
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Thanks for this advice! My car died on the first day I had declared a "pre-retirement holiday" as I start to work off an extra year's worth of vacation days in the final year. Oh, well.
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Old 06-13-2017, 09:55 AM   #5
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I think it works fine, and as stated the difference in rate with car rates being low now makes it almost negligible. Also, just because a state allows the pre-payment penalty mentioned, does not mean the specific lender you use has that rule. Just check the loan docs over to ensure no issues with pre-payment in full after 1-2 months.
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Old 06-13-2017, 10:12 AM   #6
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Dealers are not the worst... they have the named company financial arm that can give a great rate...

Also, sometimes they get a kickback if they get a loan and will give you some of it...


BUT, another option is to just rent a car for 2 or so months.... they are cheaper than the daily rate with long term rents...
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