Can one refinance a car ?

[Dolby]

I got a car 2 or so months ago and I got a high interest rate because there was too much equity in the car - so I accepted the higher rate as I understand there is more risk.

However in a few weeks I'm getting some money in and was wondering if I could pay off the car, and refinance at a 'normal' equity and get a 'normal' rate?

Thanks

 

[The_MAC]

pay off the car, and refinance

That doesn't make sense?

 

[Fazda]

That doesn't make sense?

I agree, it makes no sense at all.

All that you can do is dump money into your current deal, and your instalments will be reduced.

 

[Arthur]

Of course you can refinance a car or anything. It depends what deal you can come to with your finance provider. They're under no obligation to lend you money, so it's all a matter of negotiation.

 

[Pitbull]

I got a car 2 or so months ago and I got a high interest rate because there was too much equity in the car - so I accepted the higher rate as I understand there is more risk.

However in a few weeks I'm getting some money in and was wondering if I could pay off the car, and refinance at a 'normal' equity and get a 'normal' rate?

Thanks

Why would you settle the full debt cash and save a load on interest vs buying it out right, saving loads of interest just to mitigate the gains by making another load with less interest? You will still end up paying more on a lower interest rate as opposed to settling it in full and not pay any interest

 

[Dolby]

Well, I could dump the R400,000 into the car now, settle and trade in a few years at R150,000 - losing a massive whack of cash.

Or I could refinance to pay off the car and use the R400,000 capital elsewhere on renovations on a property or even purchase a second property to rent. Or shares. Or do anything else with the capital that won't lose me R250,000 over a few years - guaranteed

 

[Dolby]

Why would you settle the full debt cash and save a load on interest vs buying it out right, saving loads of interest just to mitigate the gains by making another load with less interest? You will still end up paying more on a lower interest rate as opposed to settling it in full and not pay any interest

Not really.

R400,000 into a kitchen, bathrooms, paint, landscaping on a rental property will yield me far more over the next few years. I have an old delapitaded house worth R1.3m now. I've pulled in agents who say R400,000 into it will give me R2.2m without trying.

Rental over the few years will also increase 30% to market value

 

[Pitbull]

Well, I could dump the R400,000 into the car now, settle and trade in a few years at R150,000 - losing a massive whack of cash.

Or I could refinance to pay off the car and use the R400,000 capital elsewhere on renovations on a property or even purchase a second property to rent. Or shares. Or do anything else with the capital that won't lose me R250,000 over a few years - guaranteed

The point is the following though:

You settle the vehicle now and only pay a very small amount of interest. The payment you would have made on the vehicle you can invest. Smaller and growing as opposed to one big lump some which will obviously grow slower. But you already saved THOUSANDS on interest.

What you want to do now is just mitigate the interest slightly, lets say a 2% interest reduction. And then invest the lump some. You will still be losing more in the long run as opposed to gaining. Unless you invest it with high stakes. I won't do that with R 400k though. Smaller amounts, high risk is way better than big amounts at low risk.

Anyway, just my 2c.

Please note this is not financial advise. Just my take on it.

 

[Pitbull]

Not really.

R400,000 into a kitchen, bathrooms, paint, landscaping on a rental property will yield me far more over the next few years. I have an old delapitaded house worth R1.3m now. I've pulled in agents who say R400,000 into it will give me R2.2m without trying.

Rental over the few years will also increase 30% to market value

If you're going to make 30% on the property, why bother then with 1 or 2 % on your interest load for the vehicle? If that is your plan, leave it as is and doe the property.

 

[The_MAC]

It all depends on which is greater, the loss due to interest on debt, or interest earned on capital

 

[Cicero]

I feel Dolby is one clued up mofo. Ever jump into an investment thread and seen his posts? (unless I'm getting mistaken with someone else)

//Following this thread for interests sake.

 

[Creag]

Just curious; what is a high interest rate?

 

[Rouxenator]

I had the same conundrum a few weeks ago. Should I take R75k and settle my car or put it into my bond. I only did 4 of the 60 instalments due and considering the car will depreciate it felt wrong to put the money into the car.

What won me over was that the car will inevitable loose value, yet I can save a couple of grand on interest if I settle it early and on the plus side I have a bit more cash each month to put into the bond.

So my advice is settle the car, and for the love of all that is sensible don't trade it in until you really have to. 10 years / 200,000+ km should be the minimum period you keep your car for.

 

[Pitbull]

I had the same conundrum a few weeks ago. Should I take R75k and settle my car or put it into my bond. I only did 4 of the 60 instalments due and considering the car will depreciate it felt wrong to put the money into the car.

What won me over was that the car will inevitable loose value, yet I can save a couple of grand on interest if I settle it early and on the plus side I have a bit more cash each month to put into the bond.

So my advice is settle the car, and for the love of all that is sensible don't trade it in until you really have to. 10 years / 200,000+ km should be the minimum period you keep your car for.

I do exactly this. Buy to own. Once paid up I drive it till it no longer works and is going to be nothing but a pile of metal on a heap. Then buy another one. That is what was so sad about my Clubcab. I would have driven that bakkie for another 10+ years with no fault. But alas, fate has dealt me a hand and now I need to buy a vehicle again and have vehicle debt again for 5 years

 

[Rouxenator]

Yeah, it actually was sad that you lost such a long term vehicle (clubcab hate aside) because I have no doubt it would have lasted a lot further. I buy to own but due to the nature of my driving and the cars that I buy I won't exactly go as far as "till it no longer works" - but close enough It needs to gets me enough to be a deposit on a new car so I can literally drive to the dealer with the spare key and green paper then drive off in a newer car

Hope you get a suitable replacement for the Ford.

 

[Dolby]

I guess the whole thing comes down to buying a car cash - or not ?

I prefer buying a car on credit, regardless of whether or not I can afford it cash. I almost feel there's an opportunity lost by dumping all that cash into a metal chassis losing 20% year on year, guaranteed.

If I look at my shares, I have a return of 33%, 48%, 52% and 30%. Dumping my R400,000 into them that will give me more in the long term. Likewise, dumping R400,000 into my house (kitchen, bathroom, paint, garden, driveway) will take my R1.3m to R2.2m. It'll take my rental from R10kpm to R14kpm. It'll do this within 6-12 months.

The total interest paid of my car at my current is R130k - and a 2% difference takes me to R105k. Although low, the R25k difference in conjunction with the increased value of my property/rental income makes it worthwhile to do what I want to me.

TLTR : I think I can do more with and grow my R400,000 cash than putting it into a car. Cash is king

 

[Rouxenator]

TLTR : I think I can do more with and grow my R400,000 cash than putting it into a car. Cash is king

It depends on what time frame you are working with and what plans you have for the car.

While that R400k will grow elsewhere at the same time you are paying interest which is a dead loss plus the car is depreciating. So only if you add the interest you pay to the depreciation and it is LESS than the growth you will get are you actually winning.

 

[FlashSA]

I got a car 2 or so months ago and I got a high interest rate because there was too much equity in the car - so I accepted the higher rate as I understand there is more risk.

However in a few weeks I'm getting some money in and was wondering if I could pay off the car, and refinance at a 'normal' equity and get a 'normal' rate?

Thanks

To answer your question directly, without long winded financial advice: yes you can.

There is normally a finance person at all car dealerships who earn a fee from the bank for a successful finance application. Find one you trust or like and tell them you want to refinance with a different bank for a better rate. They will shop around and get you the best deal. If you accept, the new finance house will settle the outstanding amount with your existing finance house and you will start paying the new finance house through repayments.

Costs should be the finance initiation fee of a grand plus vat and you will need to roadworthy the car and pay licensing. All in about R2.5k.

I recently bought a Ford Credit special where I saved R18k on a Ecosport by financing with them. Problem is, I hate ABSA who back ends Ford Credit and their interest rate is 1% above what Wesbank always gives me. I might get my trusted finance lady to switch me as soon as I have some extra cash to throw into the new deal as a deposit (not compulsory). For R2.5k, it will get me a better rate and away from satan and I still saved the R18k on the new car.