Auto Finance Contract

[Rianne]

Our auto loan contract states "You may prepay all or part of the unpaid part of the Amount Financed at any time without penalty."
The simple interest is calculated daily. So the fewer days I have the loan, the less interest. The number of payments on the loan is 60, which means 1825 total days.

We financed the new car based on the fact that an extra $1000 would come off the price car.
I went online, set up the account and prepaid $21K , since we were going to pay cash anyway. The finance person at the dealership said Hyundai finance wants us to pay in 3 installments. That's the only criteria for the loan. The interest accrued was $17.00 when I paid the $21K. Bought the car Oct. 22, paid the $21K Oct. 26.
Nov. 1 or so, I will pay an additional $500, then additional $500, then pay off the loan (total loan $22,400). The accrued interest should be less than $100. Am I figuring this correctly.

Does the "due date" have anything to do with how much or when I pay?
It's been years since we took out a loan. Paid cash for our house.

 

[gwraigty]

The way I understand it, the due date means that your scheduled car payment is due by that date, regardless of prepayments. IOW, you can't prepay and skip the regular car payment. If you have the total loan balance paid off before your first due date, then you should be done. A good deal for you for getting the $1,000 off!

 

[Rianne]

IOW, you can't prepay and skip the regular car payment. If you have the total loan balance paid off before your first due date, then you should be done.

Just to be sure...I can totally prepay the entire loan before the first due date. I have read the contract several times. There is NO mention of prepaying (as a penalty) before the first payment due. I'm still paying some interest. If I paid the loan off as the contract reads, I"d be paying > $4K in interest (at 6.99%)! What a rip.

Also, I had to unfreeze my credit. I want the title to have DH name and mine as co owners. Right now only my name on it. Can you believe they charge you to call Customer Service!

 

[OldShooter]

This kind of game is lots of fun. Maybe 10 years ago I got $2,500 off the price of a Mazda RX-8, made two payments and was done. That was the second time in my life that I borrowed to buy a car.

The F&I guy gave me this caution though: He recommended not paying the loan off until the car title was through the state and in my hands. He had seen problems when a lien release was put into the system before the title had been completely processed. Given my general attitude towards bureaucracy, this made complete sense to me and I complied.

YMMV of course.

 

[Rianne]

This kind of game is lots of fun. Maybe 10 years ago I got $2,500 off the price of a Mazda RX-8, made two payments and was done. That was the second time in my life that I borrowed to buy a car.

The F&I guy gave me this caution though: He recommended not paying the loan off until the car title was through the state and in my hands. He had seen problems when a lien release was put into the system before the title had been completely processed. Given my general attitude towards bureaucracy, this made complete sense to me and I complied.

YMMV of course.

But, I won't get the title until I pay off the loan. Right?

 

[REWahoo]

But, I won't get the title until I pay off the loan. Right?

You may get a title, but it will show a lien holder. Once you pay off the loan you will get another title, this time a "clear" one.

 

[OldShooter]

You may get a title, but it will show a lien holder. Once you pay off the loan you will get another title, this time a "clear" one.

That's the way it works in our state, too. We get a title indicating a lien on the vehicle, then we get a lien release when the loan is paid off.

Maybe a simpler point: Don't do anything to confuse or annoy the bureaucrats. The most powerful person in the world is a clerk who has a piece of paper that you need.

 

[ExFlyBoy5]

We financed the new car based on the fact that an extra $1000 would come off the price car.

This fact, (among others you have shown such as a charge calling customer service?!?) is why I would not do business with this company. It's all a shill and that "$1000 off" is getting paid for in some form or fashion...they make sure of it. This is a game in which the deck is stacked against the consumer and the house *always* wins.

On the subject of liens and titles, many states now do electronic titles and are required to do so by law. In my last state, lenders were required to remove any liens within a set number of days (I think it was 14 or 21...can't remember). But, it is wise advice to wait a good month after paying it off before trying to make any title changes.

 

[Rianne]

Ok, I should wait for the lien holder title, then pay it off.

 

[Rianne]

This fact, (among others you have shown such as a charge calling customer service?!?) is why I would not do business with this company. It's all a shill and that "$1000 off" is getting paid for in some form or fashion...they make sure of it. This is a game in which the deck is stacked against the consumer and the house *always* wins.

On the subject of liens and titles, many states now do electronic titles and are required to do so by law. In my last state, lenders were required to remove any liens within a set number of days (I think it was 14 or 21...can't remember). But, it is wise advice to wait a good month after paying it off before trying to make any title changes.

Yeah, I don't plan to call anyone. I will get the lien title electronically, then I'll pay off the loan and wait a month, then change the title. What would I do without this forum?

 

[Texas Proud]

I think you are confusing the meaning of 3 payments.... it does not mean sending in 3 checks but going through 3 payment cycles from what I was told... IOW, 3 months of payments and then pay it off..


Now, there was nothing preventing you from paying a big amount on the first payment to reduce the future interest...

 

[Rianne]

I think you are confusing the meaning of 3 payments.... it does not mean sending in 3 checks but going through 3 payment cycles from what I was told... IOW, 3 months of payments and then pay it off..


Now, there was nothing preventing you from paying a big amount on the first payment to reduce the future interest...

So say I pay the Nov. 22 early of $500, that reduces the interest by that many days, since interest accrues daily. Then, it shows next payment due, Dec. 22, I pay $500 early. Interest reduced by those number of days. Then pay last payment. Right? I'm just confused by the "due date" which is part of the cycle. 7% of $1440 remaining on loan is $100.80. If I can reduce the # of days I can cut that interest down.

 

[jazz4cash]

What do you have in writing that describes the $1k incentive? I would pay it as you describe (1 large and 2 small chunks) spread out over 3 billing cycles. Don’t worry about the title at all, it’ll get cleared up soon enough. The cost for these discounts are paid by the folks that can’t or won’t pay them off early. 6.99 is definitely on the high side. I think our credit union pays a bonus if you transfer an auto loan to them.

 

[OldShooter]

... It's all a shill [do you mean fraud?] and that "$1000 off" is getting paid for in some form or fashion...they make sure of it. This is a game in which the deck is stacked against the consumer and the house *always* wins. ...

This statement makes no sense to me.

What is your view of buying a major appliance when it is on sale? How about a credit union that offers a loan at a few basis points less than the megabank near by? Are those some kind of fraud, too?

 

[Rianne]

What do you have in writing that describes the $1k incentive? I would pay it as you describe (1 large and 2 small chunks) spread out over 3 billing cycles. Don’t worry about the title at all, it’ll get cleared up soon enough. The cost for these discounts are paid by the folks that can’t or won’t pay them off early. 6.99 is definitely on the high side. I think our credit union pays a bonus if you transfer an auto loan to them.

The $1K was written on their offer to purchase and added to purchase total price. So exactly as auto sales guy wrote it:
$25,710
- 1,200 trade in (1997 toyota camry, 197,000 miles and some issues)
+ 1544.68 tax
+ 179.81 Dock fee
+ 200.00 Plates, license transfer fee (they do all the Secy. of State transfers)
$26,434.49
-$4,000 ($3000 rebate + $1000 for loan)
$22,434.49 So, we'll pay @ $120 interest for the loan, I think, not exact, if I pay 3 payment cycles. BUT NOWHERE in the contract does it say I must pay in 3 payment cycles. The finance rep. said that verbally.
For a new 2019 Huyundai Sonata SEL with all the bells and whistles, heated seats, apple play, etc

 

[HarveyS]

Congrats on your new ride!
from post 12: " 7% of $1440 remaining is $100.80"
Correct, but only after one year. The daily rate of interest on your loan balance of $1440 at 7% APY is about $0.28, or $8/month.
Somewhere on this forum it was said that the dealer gets an incentive for financing only if the customer takes 3 months or longer to fully pay off the loan. I don't know if that is true or not.

 

[Rianne]

Congrats on your new ride!
from post 12: " 7% of $1440 remaining is $100.80"
Correct, but only after one year. The daily rate of interest on your loan balance of $1440 at 7% APY is about $0.28, or $8/month.
Somewhere on this forum it was said that the dealer gets an incentive for financing only if the customer takes 3 months or longer to fully pay off the loan. I don't know if that is true or not.

Thanks, they took $17 something for 4 days of interest on $22,434.49. Then, for the sake of the dealers, I'll do as they asked. They were nice.

 

[jazz4cash]

Ok, sounds like you hit the sweet spot. Enjoy the new car!!

 

[Senator]

I did a similar thing with my Truck ($70K). Finance ~$15K. Paid $12K as soon as I had an account to log on with, and let the rest run out in three payments. I got the title when I got it, and I then I got a loan release when it was 100% paid off. Payments made no difference in regard to early payment timing. I was able to pay $2500 on my credit card too.

From what I understand, the dealer/manufacturer gets a spiff when you use financing. When you pay it off in less than ~3 payments, they lose the spiff.

Paying off the loan early is not an issue. Make sure there is no rebate-claw back on your purchase agreement. There is probably not, but that may be where there is a problem, if any.

Paying it off early is not an issue, paying it off before the dealer gets the credits for their rebate might be. That is where the right thing to do is let the loan go 3 payments.

I also joined the AQHA for $45 and got an additional $500 rebate...

 

[Montecfo]

I think you are confusing the meaning of 3 payments.... it does not mean sending in 3 checks but going through 3 payment cycles from what I was told... IOW, 3 months of payments and then pay it off..


Now, there was nothing preventing you from paying a big amount on the first payment to reduce the future interest...

I think the purpose of the three payments was this: the dealer would get charged back the promotional fee if there were not at least three payments on loan prior to pay off (90 days).

 

[Senator]

Exactly. I am not sure if the dealer can take back the $1000 incentive or not.

It may be part of the auto contract.

 

[Montecfo]

No, the finance company charging the dealer back.