Question on car loan re-fi... is it worth it for me?

[lemmyk]

Hey everyone... here's a question for you math people...

I have a car loan through VW Credit:

60 Months
~17,000, first payment was in Jan 08 (just made my 8th payment).
4.9%
~$321 per month

I try to pay extra every month, between $350 and $400 per month.

I currently owe ~$14,850 (payoff).

My sis-in-law works at AAA, and can get me a new loan at 4.49% on my car - for 36, 48 or 60 months.

Would a half point reduction in interest be worthwhile? If I took the 60 and paid $350 per month, would I end up shorter than I will currently? What about 36 or 48?

Not sure if this half point will make much difference, and let's say I can pay $350 currently per month, should I go for the 4 year and pay a few extra bucks per month?

Help!

Thanks!

[mrpaseo]

Hmmm, your numbers do not line up. You said 17,000 @ 4.9%, that would put your payments at $320.03.

Add a 350 payment monthly (Extra payment) and after 8 months you should owe: 12,125.84

With the info you provided (Your 321 payment and 350 extra payment per month), your loan will be paid off in 27 payments rather than 60 payments. But like I said, you should owe 12,000 an dyou say you owe 14,850 so let's go from there.

Let's say you refinanced:

14,850 @ 4.49%

36 months: 441.68 (Monthly Payment) plus 228.35 extra payment (This will make your payments the same as you were paying before you refinanced). You would have the loan paid off in 24 months with the last payment being 120.18.

48 months: 338.56 (Monthly Payment) plus 332.44 extra payment will pay the loan off in 24 months with the final payment being 96.70

60 months: 276.78 (Monthly payment) plus 394.22 extra payment will pay off the loan in 24 months with the final payment of 96.79

Someone please verify my numbers, if you have any more questions please ask (i.e. what if I paid 400 extra etc.)

Ray

[lemmyk]

Whoops... sorry if I didn't explain so well I wish I was paying an EXTRA $350 per month

I am actually paying between $350-$400 TOTAL (including actual payment + extra).

So in actuality I am paying between $30-$80 EXTRA per month.

Sorry I was misleading. So... plan on my sending in a total of $350 per month (unless I take a shorter loan with a higher monthly payment, in that case, there won't be much extra, if any sent in with the payment).

[noppenbd]

I'd do the refi for 48 months. Your payment will be around $340 so if you continue to pay $350 you'll pay it off in about 47 months, and will pay less interest than on the current loan. If you can pay $400 even better. Either way you are better off than in your current loan.

[maat55]

Make sure any loan you get is a simple interest loan with no penalty for early payoff.

[ScrimpAndSave]

Maat55 - really good point!

[cptacek]

I would also take the 48 month loan at 4.49%.

"Would a half point reduction in interest be worthwhile?" is only a question for mortgages (or other loans with origination fees, etc) because of the fees associated with them might not make the refinance worthwhile...i.e., you might end up spending more on the refinancing than you save on the refinance.

But when you refinance a car, there is very little, if any, fees associated with the loan (check this out to be sure, but I'm fairly certain that is true) so any reduction in interest, plus the monthly payments you will be knocking off with the 48 month loan vs the 52 month loan you have now (60 - 8 payments already) will put you ahead.

[mrpaseo]

Whoops... sorry if I didn't explain so well I wish I was paying an EXTRA $350 per month

I am actually paying between $350-$400 TOTAL (including actual payment + extra).

So in actuality I am paying between $30-$80 EXTRA per month.

Sorry I was misleading. So... plan on my sending in a total of $350 per month (unless I take a shorter loan with a higher monthly payment, in that case, there won't be much extra, if any sent in with the payment).

CURRENT PAYMENT: $321
EXTRA PAYMENT: $29
___________________
TOTAL CURRENT PAYMENT: $350



Refinance:

AMOUNT: $14,850

Years: 3
Monthly Payment: $441.69
Extra Payment: None
Total Payment: $441.69
Pay off in: 36 months with last payment being $440.03

Years: 4
Monthly Payment: $338.56
Extra Payment: $11.44
Total Payment: $350
Pay off in: 47 months with last payment being $100.27

Years: 5
Monthly payment: $276.78
Extra Payment: $73.22
Total Payment: $350
Pay off in: 47 Months with the last payment being $100.45

As you can see, if you have the same loan amount, and you pay the same amount (Primary payment and extra payment totaling the same amount), the numbers are not really that much different. I realized this when I went to refinance my home from a 30 year loan (Fixed) to a 15 year fixed, after telling the bank my numbers to include my extra payments... she told me that if I continue it will be paid off in less than 15 years. The difference being if I kept my loan that I have now and there was an emergency, I could not pay the extra payment and will not default on my loan.

Knowing that, if you do refinance, I would suggest the longer loan (5 years) so long as you keep up with the extra payments it's almost identicle as the 4 year note. Obviously the 3 year note is above your current payment so it would not be an option.

Let me know if you have any more questions,
Ray


No. Payment Date Start Balance Scheduled Payment Extra Payment Total Payment Principal Interest Final Balance
1 9/1/2008 $14,850.00 $276.78 $73.22 $350.00 $294.44 $55.56 $14,555.56
2 10/1/2008 $14,555.56 $276.78 $73.22 $350.00 $295.54 $54.46 $14,260.02
3 11/1/2008 $14,260.02 $276.78 $73.22 $350.00 $296.65 $53.36 $13,963.38
4 12/1/2008 $13,963.38 $276.78 $73.22 $350.00 $297.76 $52.25 $13,665.62
5 1/1/2009 $13,665.62 $276.78 $73.22 $350.00 $298.87 $51.13 $13,366.75
6 2/1/2009 $13,366.75 $276.78 $73.22 $350.00 $299.99 $50.01 $13,066.77
7 3/1/2009 $13,066.77 $276.78 $73.22 $350.00 $301.11 $48.89 $12,765.66
8 4/1/2009 $12,765.66 $276.78 $73.22 $350.00 $302.24 $47.76 $12,463.42
9 5/1/2009 $12,463.42 $276.78 $73.22 $350.00 $303.37 $46.63 $12,160.05
10 6/1/2009 $12,160.05 $276.78 $73.22 $350.00 $304.50 $45.50 $11,855.55
11 7/1/2009 $11,855.55 $276.78 $73.22 $350.00 $305.64 $44.36 $11,549.91
12 8/1/2009 $11,549.91 $276.78 $73.22 $350.00 $306.79 $43.22 $11,243.12
13 9/1/2009 $11,243.12 $276.78 $73.22 $350.00 $307.93 $42.07 $10,935.19
14 10/1/2009 $10,935.19 $276.78 $73.22 $350.00 $309.09 $40.92 $10,626.10
15 11/1/2009 $10,626.10 $276.78 $73.22 $350.00 $310.24 $39.76 $10,315.86
16 12/1/2009 $10,315.86 $276.78 $73.22 $350.00 $311.40 $38.60 $10,004.46
17 1/1/2010 $10,004.46 $276.78 $73.22 $350.00 $312.57 $37.43 $9,691.89
18 2/1/2010 $9,691.89 $276.78 $73.22 $350.00 $313.74 $36.26 $9,378.15
19 3/1/2010 $9,378.15 $276.78 $73.22 $350.00 $314.91 $35.09 $9,063.24
20 4/1/2010 $9,063.24 $276.78 $73.22 $350.00 $316.09 $33.91 $8,747.15
21 5/1/2010 $8,747.15 $276.78 $73.22 $350.00 $317.27 $32.73 $8,429.88
22 6/1/2010 $8,429.88 $276.78 $73.22 $350.00 $318.46 $31.54 $8,111.42
23 7/1/2010 $8,111.42 $276.78 $73.22 $350.00 $319.65 $30.35 $7,791.77
24 8/1/2010 $7,791.77 $276.78 $73.22 $350.00 $320.85 $29.15 $7,470.92
25 9/1/2010 $7,470.92 $276.78 $73.22 $350.00 $322.05 $27.95 $7,148.88
26 10/1/2010 $7,148.88 $276.78 $73.22 $350.00 $323.25 $26.75 $6,825.62
27 11/1/2010 $6,825.62 $276.78 $73.22 $350.00 $324.46 $25.54 $6,501.16
28 12/1/2010 $6,501.16 $276.78 $73.22 $350.00 $325.68 $24.33 $6,175.48
29 1/1/2011 $6,175.48 $276.78 $73.22 $350.00 $326.89 $23.11 $5,848.59
30 2/1/2011 $5,848.59 $276.78 $73.22 $350.00 $328.12 $21.88 $5,520.47
31 3/1/2011 $5,520.47 $276.78 $73.22 $350.00 $329.35 $20.66 $5,191.13
32 4/1/2011 $5,191.13 $276.78 $73.22 $350.00 $330.58 $19.42 $4,860.55
33 5/1/2011 $4,860.55 $276.78 $73.22 $350.00 $331.81 $18.19 $4,528.73
34 6/1/2011 $4,528.73 $276.78 $73.22 $350.00 $333.06 $16.95 $4,195.68
35 7/1/2011 $4,195.68 $276.78 $73.22 $350.00 $334.30 $15.70 $3,861.38
36 8/1/2011 $3,861.38 $276.78 $73.22 $350.00 $335.55 $14.45 $3,525.82
37 9/1/2011 $3,525.82 $276.78 $73.22 $350.00 $336.81 $13.19 $3,189.01
38 10/1/2011 $3,189.01 $276.78 $73.22 $350.00 $338.07 $11.93 $2,850.94
39 11/1/2011 $2,850.94 $276.78 $73.22 $350.00 $339.33 $10.67 $2,511.61
40 12/1/2011 $2,511.61 $276.78 $73.22 $350.00 $340.60 $9.40 $2,171.01
41 1/1/2012 $2,171.01 $276.78 $73.22 $350.00 $341.88 $8.12 $1,829.13
42 2/1/2012 $1,829.13 $276.78 $73.22 $350.00 $343.16 $6.84 $1,485.97
43 3/1/2012 $1,485.97 $276.78 $73.22 $350.00 $344.44 $5.56 $1,141.53
44 4/1/2012 $1,141.53 $276.78 $73.22 $350.00 $345.73 $4.27 $795.80
45 5/1/2012 $795.80 $276.78 $73.22 $350.00 $347.02 $2.98 $448.78
46 6/1/2012 $448.78 $276.78 $73.22 $350.00 $348.32 $1.68 $100.45
47 7/1/2012 $100.45 $276.78 $73.22 $350.00 $349.63 $0.38 $(249.17)