Vehicle Loan Question

[Drake3287]

Question regarding an early pay off of a car loan. I'm planning to purchase a fairly expensive new F150 and of course the dealer will give me a better deal if I'm willing to finance the loan through them (Ford Credit). In my case I had planned to pay cash anyway and simply pay myself back instead of taking an actual loan. (I have the available cash)

Although I've had many car loans over the years, I've never paid one off super early. Unless it comes with a pre-pay off penally, can I simply get a Ford Credit loan and simply pay it off in full a month or two later without any issues?

Just looking to get the best deal possible without paying a high interest rate loan.

 

[stephenson]

I've done a loan once - with a payoff prior to the first payment - no issues.

As long as it is in the contract, I don't see why not.

 

[braumeister]

Although I've had many car loans over the years, I've never paid one off super early. Unless it comes with a pre-pay off penally, can I simply get a Ford Credit loan and simply pay it off in full a month or two later without any issues?

There should be no problem with that; many of us have done exactly that.
But be sure to read the paperwork carefully before you sign it -- if there is any restriction on early payment it will have to spelled out there.

 

[Jerry1]

There’s usually some limitations on those loans, like you have to keep it for a few months but I’ve never heard of one with an early payment penalty.

Plus, the “keep it for a few months” requirement seems to be something that impacts the dealer more than you. I understand they don’t get their full commission if you don’t keep it long enough. I’ve read that people read their loan documents and see no penalty clause and go ahead and pay it off earlier than suggested by the dealer.

Kind of like credit card points - read your documents and work them the best you can to your advantage.

 

[PaunchyPirate]

When I purchased my F150 (2 vehicles ago), I also planned on paying cash up front. But there was an added $1000 incentive to finance it. So I asked if I could finance it but pay it off early. They assured me there were no penalties in the contract to stop me from doing this. However, the finance guy requested that I not pay it off for 3 months. He didn't say why, but it was pretty obvious that he got a bigger kickback if I kept the loan at least 3 months. Once I got home, I read the contract carefully, and indeed, there was no wording preventing me from paying it off early. So when it came time for the first payment, I simply paid off the entire vehicle. There were no financial repercussions.

I was not pleased with the performance of the sales rep who did the transaction. He was the epitome of the horrible car salesmen you see ridiculed all over the place. I had no loyalty to that dealership either since I had driven 60 miles to get that particular truck.

So I saw no reason to wait 3 months to pay it off.

 

[OldShooter]

I once got a $4500 credit on a loan to buy a Mazda RX-8. At the time I was told that state law prohibited early payoff penalties. So I was good there and I took the loan.

The F&I guy recommended that I not pay the loan off until I received the printed car title from the state though. He said he'd seen things get gummed up if both the vehicle purchase and the loan payoff were grinding through the bureaucracy at the same time.

 

[rodi]

Early payment penalties are fairly rare - but worth checking for. My cousin paid off his 2 year old camry 1 year before the loan was up. They hit him with a penalty. This was in the 90's though. A long time ago.

 

[pb4uski]

Question regarding an early pay off of a car loan. I'm planning to purchase a fairly expensive new F150 and of course the dealer will give me a better deal if I'm willing to finance the loan through them (Ford Credit). In my case I had planned to pay cash anyway and simply pay myself back instead of taking an actual loan. (I have the available cash)

Although I've had many car loans over the years, I've never paid one off super early. Unless it comes with a pre-pay off penally, can I simply get a Ford Credit loan and simply pay it off in full a month or two later without any issues?

Just looking to get the best deal possible without paying a high interest rate loan.

I've done that at least twice over the years to capture an incentive offered by the credit company... usually $500 or more... take the financing and the incentive, make a couple monthly payments and then pay off the loan. Never a penalty... just principal and interest since the last payment... but check for that before signing on the dotted line.

I think that enough of the loans persist that the bank or credit company still makes out... but on the other borrowers.

 

[mystang52]

If you decide to take the loan with the intent to pay it off early, don't tell the salesman. Just go through all of the paperwork, go home with your car, and then decide when to pay off the loan.

 

[freedomatlast]

Did this last year on a new Honda. That dealer told me that I didn't have to, but he would suggest waiting at least a month before paying it off early with no prepayment penalty. Waiting could eliminate a possible paper work issue which happened before to customers when the vehicle was paid off before Honda Financial had the title and other paperwork processed and in their system. I ended up keeping the 1.9% loan now that 5.5% return on cash is readily available. On any given day I can go to Honda Financial's website and see the payoff amount as of that day and any day in the next week.

Years before, I did this with a new Jeep and that salesman said it could be paid off anytime, with no prepayment penalty, but asked us if we would keep it at least three months so he or the dealership wouldn't lose some kind of incentive. That worked for us since a nice bonus was coming in the next few months and we paid it off with the bonus money when that hit the account.

 

[pb4uski]

The very last time that I did it the F&I guy was fully aware that I intended to pay it off very early and was doing the loan only for the incentive. He did ask that I make a couple monthly payments before paying it off.

While he didn't say so I suspect that if it gets paid off right away that the bank probably tries to clawback the incentive from the dealer.

 

[latexman]

If I get a rate < 3% per annum, I put down the minimum and set the payments on automatic payment until it’s paid off, and stay invested in the market at my AA.

 

[Drake3287]

Thanks for all the comments guys, sounds like it shouldn't be an issue then. I'll certainly read all the fine print though. And of course depending on the dealer finance person, I don't plan to tell them about my plans.

 

[wrigley]

Question regarding an early pay off of a car loan. I'm planning to purchase a fairly expensive new F150 and of course the dealer will give me a better deal if I'm willing to finance the loan through them (Ford Credit). In my case I had planned to pay cash anyway and simply pay myself back instead of taking an actual loan. (I have the available cash)

Although I've had many car loans over the years, I've never paid one off super early. Unless it comes with a pre-pay off penally, can I simply get a Ford Credit loan and simply pay it off in full a month or two later without any issues?

Just looking to get the best deal possible without paying a high interest rate loan.

I just did that through Chrysler Capital. I got an additional $2000 off the price of a truck if I financed through them. I made 1 payment to Chrysler Capital and then paid the truck off.

Mike

 

[rk911]

We don't buy vehicles very often. We just sold our '03 Jeep TJ and bought a new '23 Wrangler and just paid cash. We made it clear to the sales guy that this was a cash deal from the git-go. We did the same in 2010 (still have that vehicle) and also in '95 (sold that one to buy the 2010 Jeep). Did paying cash help with the bottom line? Dunno, but the bottom lines were in line with what we were willing to pay. Plus we didn't have to sit thru a sales pitch from the finance guy regarding financing.

When we bought our '03 Wrangler we were talked into a 0% interest, 36-mo payment plan (the bottom line / by 36). I set up auto-debit payments so all I had to do was account for them in Quicken. In hindsight it was not worth the minimal hassle. If ya got the cash then pony up, drive away and rest EZ.

 

[OldShooter]

... We made it clear to the sales guy that this was a cash deal from the git-go. ...

I have been told that this is unwise. The store makes money selling the loans, so if they know they will not have the opportunity you may be quoted a higher price for the car. Ditto for extended warranties.

 

[COcheesehead]

I have been told that this is unwise. The store makes money selling the loans, so if they know they will not have the opportunity you may be quoted a higher price for the car. Ditto for extended warranties.

Yep, dealers get a commission on loans.

 

[pb4uski]

I have been told that this is unwise. The store makes money selling the loans, so if they know they will not have the opportunity you may be quoted a higher price for the car. Ditto for extended warranties.

I always negotiate the price first and don't say anything about how I am paying... if they ask I say I am undecided but need to decide whether we even have an acceptable deal first... then after we have agreed on price I ask what financing options are possible.

If I can get an additional discount by financing and then paying off the loan then I'm open to it.

 

[rk911]

I have been told that this is unwise. The store makes money selling the loans, so if they know they will not have the opportunity you may be quoted a higher price for the car. Ditto for extended warranties.

could be but the quoted price for our new Wrangler was in the range we had set. We were satisfied with the price. That was on May 31st. We ordered some post-sale parts (running board and a soft top...I did not want a hard top). They kept the Jeep for a few days to install the running boards but the soft top was going to take a bit longer.

On June 1st I made the first of four trips to our local hospital ER...massive blood in my urine (massively large prostate). I had to wear a catheter (ultimately for 9-weeks). That made driving very uncomfortable and my wife no longer drives. So when the soft top came in the salesman and a fellow from their shop drove out to our place, removed the hard top and placed in the garage, drove the Jeep back to the dealer, installed the soft top and then brought the Jeep back to us. No charge.

I had surgery on 7/31, (no cancer) It was supposed to be one overnight in the hospital but ended up staying 2-weeks. When I returned home I could not yet drive so the new Jeep sat in the garage. Finally, after about 10-days I felt good enough to drive around the block...almost 11-weeks after purchasing the Jeep.

Kudos to the dealer for their service. Not sure if I can mention their name...moderator pls feel free to edit this out if need be.

River Front Jeep Ram Dodge in North Aurora, IL. Salesman Dan Spooner.[/b]

 

[jazz4cash]

Navy Federal Credit Union is offering $200 if I refi my vehicle loan with them. I never heard of an auto loan refi. I bought the vehicle less than a year ago. I don’t see it making much difference in the payment but the $200 is tempting.

 

[rk911]

any early payoff penalty?

 

[jazz4cash]

Good question. I assume there is no prepayment penalty but I need to verify. I keep forgetting about the offer since the loan is on autopay.

 

[Out of Steam]

The F&I guy recommended that I not pay the loan off until I received the printed car title from the state though. He said he'd seen things get gummed up if both the vehicle purchase and the loan payoff were grinding through the bureaucracy at the same time.

This sounds like good advice. I'm also vehicle shopping right now, but will have to hold the loan for 18-24 months.