A WOMAN has been saddled with a hefty $500 car payment each month – before she made a simple change.
According to Yahoo Finance data, the average new car loan payment is $734 a month, while the figure is $525 for used cars.
A woman was able to save on her car loan with a simple tweak[/caption]
On average, a new car loan payment is $734 a month, while the figure is $525 for used cars[/caption]
But in a report by Fox26Houston, drivers can save an average of between $100 and $200 a month when they refinance their auto loans.
Better yet, they may not need to wait until interest rates drop to reap the savings.
One driver, Imani Muhammad, loves her Nissan Kicks – but not the auto loan she had at 11.5% interest.
She said: “I have a 2023 Nissan Kicks. I bought one three times, I love that car.
“I needed a car at the moment, so I went to the dealership and signed whatever paperwork was necessary.
“Definitely not the smartest financial choice on my behalf.”
She then refinanced the loan using an online auto refinancing platform called Caribou, which offered her a handful of loan options at lower rates.
“My original payment was $497 and now, including the gap insurance, it’s $343. So it’s a big difference,” said Muhammad, who’s now saving $154 a month.
“I’m able to put a little more towards savings to make bigger purchases in the future, whether it’s traveling or buying a home one day,” she added.
“There are a few things I’m looking at, so I’m able to see that goal come closer to my everyday with that extra money.”
Caribou CEO Simon Goodall says car owners can enter their information on the site to explore loan options through a network of lenders.
These are primarily credit unions and community banks, while he maintains there’s no application fee and it won’t affect credit just to check options.
“We would only do a hard credit pull once they found a rate that’s interesting to them. Then we take it to the next step and do a formal application,” said Goodall.
Some lenders charge a loan origination fee, according to Goodall, but it’s usually rolled into the loan.
But even a small improvement to a driver’s credit score can result in better loan terms.
Goodall said: “We find that customers, as soon as a few months after purchasing a vehicle from a dealership, are able to save money from a refinancing perspective, because they don’t always shop rates when they’re buying a new car.”
Those who borrow can also get a longer-term loan to lower their monthly payments – although it will add to the overall cost of the car.
Goodall says refinancing is a time you can cancel add-ons you bought – including a service contract or gap insurance.
He added that canceling add-ons can sometimes mean money coming back to you, while drivers who owe more than the car is worth are often still able to refinance the loan.
How to spot add-on fees at the dealership
The Federal Trade Commission is cracking down on dealerships that charge buyers unfairly.
However, as many transactions aren’t spotted due to electronically signed documents, many added-on fees aren’t spotted. Here’s how the agency says you can spot them.
- Demand a physical copy of the sales contract or invoice, and read it carefully. Customers aren’t required to pay for add-ons they don’t want, like nitrogen-filled tires, paint protectant, wheel and tire insurance, etc.
- Be sure you understand the total cost, not just the monthly. Make sure the total cost is in writing so you can get an idea of how other fees play into the monthly fee. If it’s different from what you originally agreed on, the dealer may be adding fees.
- Explore your options for financing. First, check with your bank, as they can give better rates on auto loans depending on your credit. Bring a hard copy of your preapproval notice to entice the dealer to meet or beat those terms.
- If you’ve been charged illegally, the FTC encourages you to report it.
Source: FTC
