Is it good to refinance a car?
cjstudent2006 asked:
I just brought a 2001 Mazda Millenia and it had 64,000 miles on it. I have fair credit but it needs some improvement. The finance manger told me to clean up my credit and come back next year to refinance and get a newer car. Should I do that? I asked one of my co-workers about that and she told me she wasn’t really clear but she thinks it works like this; if I go to the dealer with a car that work $9000 and I only owe $6000, they would used the value of my car to pay of the amount owed and apply that to a down payment to the new car. Is that how it works? I have some time to think but I want to make the right decision.
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I just brought a 2001 Mazda Millenia and it had 64,000 miles on it. I have fair credit but it needs some improvement. The finance manger told me to clean up my credit and come back next year to refinance and get a newer car. Should I do that? I asked one of my co-workers about that and she told me she wasn’t really clear but she thinks it works like this; if I go to the dealer with a car that work $9000 and I only owe $6000, they would used the value of my car to pay of the amount owed and apply that to a down payment to the new car. Is that how it works? I have some time to think but I want to make the right decision.
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Tags: Co Workers, New Car, Value Of My Car
February 1st, 2009 at 3:57 pm
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YOur friend is right about how that works, but that is not refinancing. That is a trade-in. Refinancing is when you try to get a new lender at a lower interest rate. If you do a trade in at the same time, then all the better for you!
February 4th, 2009 at 4:07 pm
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Actually what is good is to own a car, no payments, only annual tax. title and maintenance. Pay off the 2001, drive it for 5 years, then trade it in, make the largest down payment you can and take the shortest repayment schedule you can afford. Otherwise you will essentially leasing a car from the bank the rest of your natural life.
February 6th, 2009 at 8:56 am
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Contrary to popular belief,one can’t “clean up” their credit.
You can ask for mistakes and discharged chapter 7/11’s be removed,but that’s about it.
February 6th, 2009 at 3:13 pm
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When purchasing a new car and trading in the old one, they will take the negative equity (The money you owe on the car that is more than it’s worth) and tack it on to the loan, so if you got a 9k loan on a new car but still had 6k in negative equity on the old one, the loan that you will get will be drawn out for $15,000.
However, once the car is worth more than they money you owe on it, you can trade it in and it serves to help bring the payment down.
February 7th, 2009 at 9:12 pm
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The only reason to refinance a car is to get a lower interest rate, thus saving you money. The dealer wants to sell you another car, thus costing you money. Find out what interest rate you’re now paying, and shop around at local credit unions to see if they have something lower. Getting another car and going further into debt will not help your credit rating. Pay this one off and then you’ll have better credit for your next car.
February 9th, 2009 at 10:18 am
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Unfortunately, you never get what your car is worth when you trade at a dealer. You would be better off to sell your car privately, then take that money to pay off your own loan, then go look for a car.
In referrence to your question… If in fact the dealer gives you blue book value for your care and it is worth $9,000 and you owe $6,000 then yes they would apply that towards your new car purchase. However, the opposite is also true. If you owe $9,000 and they give your $6,000 then they will add the $3,000 difference to the price of your new vehicle.
February 11th, 2009 at 7:12 pm
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If it is worth $9,000.00 trade in value and you owe $6,000.00 that is a difference of $3,000.00 net, but you have to consider the condition of the vehicle as well. If your vehicle is in excellent condition, noe dents, scratches, paint is fine and interior is excellent…then you can reap the total value pretty much.
If you trade in your car now, they will take it and pay it off for you and you request $2,000.00 in a check and apply $1,000.00 to your purchase. When you buy a new car they will work pretty decent. If your buying a used car they want to keep it all and apply it to the car and screw you out of your money.
I traded in a 2005 Cadillace Escalade for a Mazda. The dealer gave me $36,000.00 on my Cadillac, but I owed $29,000.00 for a 30 day pay out. That left me with a balance net of $7,000.00.
I told them to apply $3,500.00 towards my new Mazda and write me a check for $3,500.00 and they did just that.
In the long run after putting down $27,000.00 as a down payment on $57,000.00 Cadillac Escalade and got them to drop it to $52,000.00…I lost $16,000.00 on the deal overall.
It is better to buy a used car with low miles before making a new purchase, becuase the fact are the facts, you depreciate that vehicle as soon as you drive it of the lot.
February 13th, 2009 at 1:11 am
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Very simple….
If you go back to refinance, they will evaluate the vehicle. IF the vehicle is worth more than you owe, you have a choice to put that money down n the NEXT vehicle or have them cut you a check. IF the vehicle is worth LESS than what you owe they will need to “bury” that difference in the NEW vehicle you are purchasing OR you pay them for the difference and DONT “bury” the amount.
Is it a good idea?….well….chances are (99%) that you will owe MORE than what the vehicle is worth ESPECIALLY in just one year of paying this vehicle off. Rule of thumb is it takes AT LEAST 1/2 - 3/4 through a finance contract for you to be at a BREAK EVEN POINT.
Chances are the dealership just wants to make more money on you…..sorry
February 14th, 2009 at 12:08 am
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The only time you refi a car is w/in 6 mos of ownership of a BRAND NEW CAR, and that’s only if it’ll save you several points. Otherwise, follow the general rule that refinancing a depreciating asset is a horribly bad idea.