84mo 3.24% option listed in Tesla Lending page now

[DrManhattan]

Do tell....

Credit union with automatic deposit.

 

[CHG-ON]

3.24 is mighty pricey in today's world.

 

[Cnasty]

1.49 for 72 months with Alliant.

Fantastic rate.

Started great now no response since I have been confirmed.

 

[icdevin]

This is going to be a little off-topic, but in the same general area:

If you take a loan, for example with a 60 month term with a rate of 1.99%, and you determine that that loan is going to cost you approximately $6,000 in interest over the life of the loan, can you dump $6,000 on top of your first payment to effectively pay off all the interest for the entirety of the loan? After that point would you simply be paying on the principal for the rest of the loan's life?

 

[Max*]

This is going to be a little off-topic, but in the same general area:

If you take a loan, for example with a 60 month term with a rate of 1.99%, and you determine that that loan is going to cost you approximately $6,000 in interest over the life of the loan, can you dump $6,000 on top of your first payment to effectively pay off all the interest for the entirety of the loan? After that point would you simply be paying on the principal for the rest of the loan's life?

No, that's not the way it works.

The interest is calculated on a monthly basis based on your remaining principle amount.

Let's say you took out a loan for $100k at 1.99%.
First months interest would be $100k*1.99%/12 = $165.83

Let's say you paid the interest only (not a regular car loan) and decided to now dump $6k into your loan, you would have a balance of $94k @ 1.99% APR, which means your new interest payment would be reduced to $155.88/month.

As you pay down your principle, the amount of interest you are paying decreases. ([made up numbers] Let's say $1,000/month car payment. You might start off paying $850 in principle reduction and $150 in interest a month, half way through the loan you might be at $925 principle reduction and $75 interest a month, and towards the end of if you might be at $975 interest reduction and $25 interest charge per month)

 

[Austin Powers]

This is going to be a little off-topic, but in the same general area:

If you take a loan, for example with a 60 month term with a rate of 1.99%, and you determine that that loan is going to cost you approximately $6,000 in interest over the life of the loan, can you dump $6,000 on top of your first payment to effectively pay off all the interest for the entirety of the loan? After that point would you simply be paying on the principal for the rest of the loan's life?

No, any additional payment would go towards the principal. You will keep accruing interest on the remainder of the principal.

 

[icdevin]

No, that's not the way it works.

The interest is calculated on a monthly basis based on your remaining principle amount.

Let's say you took out a loan for $100k at 1.99%.
First months interest would be $100k*1.99%/12 = $165.83

Let's say you paid the interest only (not a regular car loan) and decided to now dump $6k into your loan, you would have a balance of $94k @ 1.99% APR, which means your new interest payment would be reduced to $155.88/month.

As you pay down your principle, the amount of interest you are paying decreases. ([made up numbers] Let's say $1,000/month car payment. You might start off paying $850 in principle reduction and $150 in interest a month, half way through the loan you might be at $925 principle reduction and $75 interest a month, and towards the end of if you might be at $975 interest reduction and $25 interest charge per month)

No, any additional payment would go towards the principal. You will keep accruing interest on the remainder of the principal.

Thank you for the enlightment(s). Thinking on it, my real question should have been, "how can I mitigate being upside down with a longer-term loan?," which I believe was answered and it seems the answer is more beneficial to me as a borrower, actually, in that what I owe on the vehicle would go down faster if extra payments aren't going towards a lump of interest.

 

[Austin Powers]

Thank you for the enlightment(s). Thinking on it, my real question should have been, "how can I mitigate being upside down with a longer-term loan?," which I believe was answered and it seems the answer is more beneficial to me as a borrower, actually, in that what I owe on the vehicle would go down faster if extra payments aren't going towards a lump of interest.

If you manage to get the promo rates that are in the high 1% range, I wouldn't pay down on the loan. Inflation-adjusted, you are actually making money on these loans. I would use that money elsewhere (max out your 401k or an IRA maybe?)

 

[Max*]

Thank you for the enlightment(s). Thinking on it, my real question should have been, "how can I mitigate being upside down with a longer-term loan?," which I believe was answered and it seems the answer is more beneficial to me as a borrower, actually, in that what I owe on the vehicle would go down faster if extra payments aren't going towards a lump of interest.

If you want to avoid being upside down, put more of a downpayment to start with.

But I agree with @Austin Powers.

 

[jelloslug]

Thank you for the enlightment(s). Thinking on it, my real question should have been, "how can I mitigate being upside down with a longer-term loan?," which I believe was answered and it seems the answer is more beneficial to me as a borrower, actually, in that what I owe on the vehicle would go down faster if extra payments aren't going towards a lump of interest.

Put more money down.

 

[icdevin]

If you manage to get the promo rates that are in the high 1% range, I wouldn't pay down on the loan. Inflation-adjusted, you are actually making money on these loans. I would use that money elsewhere (max out your 401k or an IRA maybe?)

If you want to avoid being upside down, put more of a downpayment to start with.

But I agree with @Austin Powers.

That I would indeed do before making any extra payments, in any case. My first priority is to minimize losses (via interest) or put another way, maximize returns, since most investments would indeed yield greater returns, as you said...

My question was more hypothetical, in case a situation arose where I needed/wanted to sell earlier than I anticipate. Usually investing in things like 401(k)/IRA ties up those funds elsewhere and withdrawing is pretty much a no-no.

 

[jelloslug]

That I would indeed do before making any extra payments, in any case. My first priority is to minimize losses (via interest) or put another way, maximize returns, since most investments would indeed yield greater returns, as you said...

My question was more hypothetical, in case a situation arose where I needed/wanted to sell earlier than I anticipate. Usually investing in things like 401(k)/IRA ties up those funds elsewhere and withdrawing is pretty much a no-no.

If you are looking at it from an investment point of view you should look at the amortization table for the loan and then using the best data you can find add compare that to the deprecation and adjust your downpayment/payments as needed. Personally, I would put 20% down and finance it for as long as you can at a rate below 2%.

 

[SageBrush]

Paying 6k upfront on a financed car that costs 100k is equivalent to financing a 94k car with no upfront down payment.
This makes it easier to see that a loan still exists.

Your example, however, does decrease the finance charges.
Instead of e.g. paying $6000, you will pay (94/100)*6000

 

[Max*]

My question was more hypothetical, in case a situation arose where I needed/wanted to sell earlier than I anticipate. Usually investing in things like 401(k)/IRA ties up those funds elsewhere and withdrawing is pretty much a no-no.

That's why I have a HELOC. I don't like to keep my money liquid (I'd rather invest it, or pay off things like my mortgage), but if I need liquid cash, I can have it the same day from my HELOC at some relatively low APR.

 

[Max*]

Paying 6k upfront on a financed car that costs 100k is equivalent to financing a 94k car with no upfront down payment.

Absolutely not.

If you take out a loan for $94k, pay nothing up front, you pay the full length of the loan.
If you take out a loan for $100k, and pay $6k upfront (i.e. first payment) you reduce the length of your loan by several months.

Also, comparing month-to-month (looking at the amortization table), if you do the 2nd option, you will owe less money than if you do the former option. Not by a lot (anywhere from $50 to $6k, depending where on the loan you are), but that helps with being less upside down.

Assuming identical APR, and loan lengths

 

[zedkyuu]

Absolutely not.

If you take out a loan for $94k, pay nothing up front, you pay the full length of the loan.
If you take out a loan for $100k, and pay $6k upfront (i.e. first payment) you reduce the length of your loan by several months.

Also, comparing month-to-month (looking at the amortization table), if you do the 2nd option, you will owe less money than if you do the former option. Not by a lot (anywhere from $50 to $6k, depending where on the loan you are), but that helps with being less upside down.

Assuming identical APR, and loan lengths

Last car loan I had (back in 2007!), I'm pretty sure that wasn't the case. Paying early just meant they applied the payment to future payments and pushed the due date for the next payment down. My mortgages are the only loans where paying early doesn't change the next payment amount or due date, but does pull in the payoff date.

But then, that loan was for a $26k Prius and was two years zero interest.

 

[Max*]

Last car loan I had (back in 2007!), I'm pretty sure that wasn't the case. Paying early just meant they applied the payment to future payments and pushed the due date for the next payment down. My mortgages are the only loans where paying early doesn't change the next payment amount or due date, but does pull in the payoff date.

But then, that loan was for a $26k Prius and was two years zero interest.

Between my wife and I, we've had a few car loans, and none of them did what you described. We even had a 0% APR loan, though we never paid more money into it (why would I? it's free money)

Actually, if they tried that crap on me, I'd call and complain. If I'm paying early, I want the payment to be applied to the principle now, to reduce the interest I'm paying. On a 0% APR loan, you have on interest, so it doesn't really matter.

 

[zedkyuu]

Yeah, there was no reason to pay off early, although I did double-pay once by accident.

My only other car loan so far was back in 2001 for a Honda and that one did exactly as I described. Paying an extra $50 in meant you owed $50 less next car payment.

 

[jelloslug]

On my BMW, if you wanted to make an extra payment you could specify if you wanted it to go toward the next payment or go toward the principal.

 

[Austin Powers]

That's why I have a HELOC. I don't like to keep my money liquid (I'd rather invest it, or pay off things like my mortgage), but if I need liquid cash, I can have it the same day from my HELOC at some relatively low APR.

Double like for leveraging a HELOC. It's a great safety net without having to keep liquid cash sitting in some 'savings' account. I get my house appraised every other year just to get an adjusted line. Given the appreciation in the past few years (in TX), it's been great so far.