#PayingOffCarEarly #CarFinancing #SaveMoney
What You Need to Know about Paying Off Your Car Loan Early
If you’re considering paying off your car loan early, you may be wondering about the benefits and potential consequences. Here’s what you need to know:
Benefits of Paying Off Your Car Loan Early
– Save money on interest: By paying off your car loan early, you can save hundreds or even thousands of dollars in interest payments.
– Improve your credit score: Paying off your car loan early can also help improve your credit score by reducing your overall debt.
– Own your car outright: Once you’ve paid off your car loan, you’ll own your vehicle outright, giving you more flexibility and financial stability.
Consequences of Paying Off Your Car Loan Early
– Prepayment penalty: Some lenders may charge a prepayment penalty for paying off your car loan early. Check your loan agreement to see if this applies to you.
– Angry calls from the dealership: If you agreed to finance your car for a certain period and then pay it off early, the dealership may not be happy. You may receive some angry calls, but they likely don’t have any legal recourse against you.
How to Pay Off Your Car Loan Early
– Make extra payments: You can pay more than your required monthly payment to pay off your car loan early.
– Refinance your loan: Consider refinancing your car loan for a lower interest rate or shorter loan term to pay it off faster.
– Use windfalls: If you come into unexpected money, such as a bonus or tax refund, consider putting it towards your car loan.
In conclusion, paying off your car loan early can save you money and improve your financial situation. While there may be some consequences, such as a prepayment penalty or angry calls from the dealership, the benefits often outweigh the risks. If you’re considering paying off your car loan early, make sure to check your loan agreement and explore your options for doing so.
You’ll save 1k by financing? That sounds absurd. I don’t understand why they would do that but honestly I’d tell the salesman to kick rocks unless he’s willing to sell you the car for how you want to buy it.
That’s may be the only way he gets his Bonus from the sale . Nothing to stop you from financing it and paying it off after the first payment. You just hurt his wallet as he hurt your credit for doing like 30 plus pulls for financing
Pretty common. Dealers make a lot (most?) of their money from financing deals. Basically the lender gives them a kickback and this helps keep your price on the car lower. The lender is gambling that you’ll keep the loan long enough for them to make money off you. From the sound of it, they probably also only pay the kickback if you do keep the loan for at least six month.
So financing actually helps you here. The dealer is taking the risk that you pay it back within 6 months, and the bank is taking a risk that you pay it back soon thereafter.
Selfishly, you can take the loan and then pay it back within a week. Less selfishly you could take the loan and then pay it off soon after the 6-month mark.
Just make sure to ask about and read carefully for prepayment penalties.
>What would happen if I agree, get the car fully in my name, and then pay it all off early?
Probably nothing
>Do they have any actual recourse against me or am I just going to get a bunch of angry calls from the dealer?
Read the contract. Any recourse like prepayment penalties need to be outlined there.
I’ve walked out of dealerships for a lot less
Former car salesman here. Banks do in fact give kickbacks to dealers. There really isn’t any “dealer” (in-house) financing anymore as they all use a mix of major lenders and local credit unions. The banks are in competition with each other so they offer these kickbacks in order to incentivize dealers to use them instead of the other guys. Think Wells Fargo vs Capital One etc. if you pay off a loan before 6 months the dealer has to return said kickback. You’re free to do whatever you want with your loan. Once you leave the dealership you have a contract with the bank, not the dealer. 99% of current auto loans are simple interest with no pre-payment penalties. I’ve sold several vehicles where we “financed” the car just to make sure the funds were in order and my customer paid the entire balance before even making one payment. Like if they were waiting for an insurance payout or inheritance to arrive. If you like the dealer, help them out and wait and they will usually treat you well every time you go to purchase from them. If you never intend to return then by all means pay it off.
Read your contract very carefully. Some loans charge prepayment penalties, meaning they can charge a fee if you pay the loan off early.
[https://www.fixdapp.com/auto-loans/which-states-allow-auto-loan-prepayment-penalties/](https://www.fixdapp.com/auto-loans/which-states-allow-auto-loan-prepayment-penalties/)
He probably gets paid more for financing. Dealerships always prefer customers to finance because they get kick backs from the direct lender they use for in house. I’m guessing the 6 month mark is where there’s no clawback on the loan
If you do, make sure there is no prepayment penalty in the contract.