Detailed question on Tesla Financing - early payments

[BlueWRXPride]

I understand the tax credit doesn't come until next year's taxes, so when I finance the car, I have to calculate payments without factoring that "discount" in. I'm going to use 100% fake number to make the question more clear. Here's my question: Say I buy the car now, but get the credit in a year. At that point there is $15k left as the balance and my monthly payment was $500/month. Say I got a $5000 credit and want to pay it directly towards the loan. Now my balance is $10k. I could keep paying $500/month, and now my loan would be paid off about 10 months early. Or could I instead start paying less per month since my $5k payment covered 10 months worth of payments? So if I paid $300/month, I could do that for 25 months before going back to paying $500/month ($5k / $200 less per month = 25 months)

I know that putting a large extra payment in doesn't recalculate my monthly payments, but I'm trying to determine if I can simulate those lower payments after I get the tax credit.

Hopefully that was at least semi-clear...

 

[boaterva]

Pre-payment for any load is dependent on the loan processor; they may or may not recalculate the payment, or just may pay it off more quickly, since you are now putting more toward the principal each payment. You would have to ask the loan originator (Tesla, here, but they may also resell the loan elsewhere...).

You can also do a new W-4 this year and get more takehome pay this year... since it's already been three months, you would get $800 per month. Or do it until next April, and get $600, etc. And use the money that way.

 

[BlueWRXPride]

That's a good point, I could adjust my witholdings to "get the credit early" and apply it to my payments.

 

[Pkmmte]

I'm not sure how Tesla's financing works but, last time I got an auto loan, my credit union gave me two options for making extra payments:

1. I could apply payments towards the principal balance. This keeps monthly payments the same but my loan would end earlier and I'd pay less interest overall.

2. I could re-amortize my loan if I paid at least 10% of the original loan amount. The loan time period would stay the same but my monthly payments would decrease.

Hope that helps.~

 

[GuardiansBeer]

> I know that putting a large extra payment in doesn't recalculate my monthly payments, but I'm trying to determine if I can simulate those lower payments after I get the tax credit.

Yes, you can simulate a lower payment. Take the $5,000 (or whatever that value is) and divide by the number of payments left (or the number of payments you want to subsidize; assume 25 months). Put the $5,000 in a checking account and set up an auto-payment to your loan for $5000/25 = $200. Then, each month write an additional $300 check to cover the loan. You are simulating a lower payment for 20 months.

 

[Uncle Paul]

Every loan may be different. You need to check how payments like these will be applied to your specific loan.

Each State may have their own lending rules.

 

[BlueWRXPride]

> I know that putting a large extra payment in doesn't recalculate my monthly payments, but I'm trying to determine if I can simulate those lower payments after I get the tax credit.

Yes, you can simulate a lower payment. Take the $5,000 (or whatever that value is) and divide by the number of payments left (or the number of payments you want to subsidize; assume 25 months). Put the $5,000 in a checking account and set up an auto-payment to your loan for $5000/25 = $200. Then, each month write an additional $300 check to cover the loan. You are simulating a lower payment for 20 months.

True, but doing it that way would work out worse for me in the long run. I'd have paid more on interest at the end of the loan if I keep the $5k in the bank and pay it out slowly vs put the $5k against the principal early. Whether that difference in interest is relevant I'd have to calculate out.

 

[S3XY]

In my case I decided to take $7,500 from my HELOC and can then pay it off however I like. Most likely I will pay it off sooner than my 2018 tax refund but if for some reason I can't I can just make my monthly minimum payments. This way my car loan is totally separate and I don't have to worry about any of those details.