Trade in or refinance

Hey

I would like some advice. My wife and I have a 2010 Honda Fit sport. Good car nothing wrong with it. But the payment and interest rate is horrible.

We are looking at two options. 1 we considered trading it in on something else. The other we considered refinancing it with our bank.

Which would look better on our credit...trading it in or refinancing it?

Mike

Refinancing an auto loan with another auto loan is unlikely to get you much, unless your interest rate is truly horrible (10+%). Would a home equity line be an option for a refinance? If not, then trading is likely the best option.

szeis4cookie wrote: Refinancing an auto loan with another auto loan is unlikely to get you much, unless your interest rate is truly horrible (10+%). Would a home equity line be an option for a refinance? If not, then trading is likely the best option.

No we rent an apartment. The car loan is 18%

Ouch. Yeah, I'm in the "sell it" camp. How much mileage? I've heard values are pretty strong on Fits - got a Carmax nearby for a risk-free baseline value?

Refinance it. My brother-in-law did it with a loan that was way lower than that, and it was still worth the effort.

www.penfed.org

You need good credit in order for them to approve you. Likely 725+ credit score.

How the berkeley do you end up with an 18% auto loan rate? Did the originator have an eye patch and a parrot on his shoulder?

I don't have any advice on how, but get rid of that nonsense and don't ever agree to that sort of silliness again.

Penfed has usually very good rates, but I'd also check with local credit unions.

I would definitely look into refinancing the car if your loan doesn't include any prepayment penalties or interest payment penalties[1] - depending on when you bought it and how much you put down, you're probably upside down or close to it and you don't want to make the situation worse by trading in the car and possibly rolling over the deficit. That's just an invitation to get berkeleyed over again.

[1] Given the interest rate sounding like the person selling the loan to you was saying "Arrrrrr" a lot, this would not surprise me. Check your loan paperwork for "rule of 78" or "sum of digits" and obviously for any prepayment/early payoff penalty. If there is any of that in there (other than a reasonable prepayment penalty), you're basically screwed and I'd advise to just pay it off as agreed.

Holy E36 M3........why was that agreed to?

Refinance if you can and keep it. The depreciation curve is such that the average cost of the vehicle typically declines the longer you own it. That assumes it still meets your needs and doesn't have any serious mechanical problems.

If the only way to get out of the debt is to sell it, then sell it yourself. You'll get much more than if you trade in.

Whatever you do, don't roll the debt into another vehicle. That's financial suicide.

I've refinanced 2 different cars. The first doesn't really count since we bought the car, agreed on payment, but didn't realize it was at 18% until the deal was done; Buy Here, Pay Here dealer. We took the car to our bank the next day and got it down to a reasonable 5 or 6%. The second time was on our current Accord. We got a great trade-in allowance that immediately built equity into the car so the bank was willing to drop a point or 2 after a couple of years of ownership. If you've got the score and equity, go for it. If you are in danger of losing the car to repo, they may be willing to extend the loan term for a smaller monthly payment. If you don't have the score or equity, I'd sell and start over.

Not to pry into your life, but there's got to be a reason you've got a loan at 18%. That's a "buy here/pay here" dealer who may or may not also run some other businesses that may or may not have legal components to them.

If you can, refinance. I'm guessing you'd owe more than the car is worth, given the finance rate. Fits keep their value, but they don't increase in value.

Best of luck.

Klayfish wrote: Not to pry into your life, but there's got to be a reason you've got a loan at 18%. That's a "buy here/pay here" dealer who may or may not also run some other businesses that may or may not have legal components to them. If you can, refinance. I'm guessing you'd owe more than the car is worth, given the finance rate. Fits keep their value, but they don't increase in value. Best of luck.

Or drive time, or ride now motors. I've seen carmax do 16 %

Details on the loan would help. How much total for how many months?

Datsun1500 wrote: You got an 18% loan and agreed to an 18% loan because of bad credit. If you trade in on another car, that loan will be high unless you fixed the original credit issue. If you owe more on the Fit than it's worth, another loan will also have that money on top of it, making it hard to lower the payment. You're better off selling it (if you can) and starting over.

Datsun is right like usual here. Unless you cannot find a cheap reliable beater with the equity on the Fit, or do not even have the small amount needed for it.