[thePuntiff]

I finally found something available, but they won't sell it to me unless I finance. I want to pay in cash - but I want the van more, so just making sure I understand how this works.

Do I lose out on anything ($$) if I finance and then immediately pay it off? Is there some nominal interest I pay? Or if I literally call the next day and pay it off is it effectively the same as paying cash?

 

[soxster]

I finally found something available, but they won't sell it to me unless I finance. I want to pay in cash - but I want the van more, so just making sure I understand how this works.

Do I lose out on anything ($$) if I finance and then immediately pay it off? Is there some nominal interest I pay? Or if I literally call the next day and pay it off is it effectively the same as paying cash?

You have to read the loan contract. If no prepayment penalty and no minimal length of loan, you should be good to go. Not sure about paying off the next day, but within a reasonable amount of time.

 

[thePuntiff]

You have to read the loan contract. If no prepayment penalty and no minimal length of loan, you should be good to go. Not sure about paying off the next day, but within a reasonable amount of time.

Thanks! Yeah - "Next day" is probably an exaggeration. But quickly to avoid interest accrual...

 

[h1k3rb]

Thanks! Yeah - "Next day" is probably an exaggeration. But quickly to avoid interest accrual...

Paying interest for a couple months wouldn't add much, then paying it off early generally improves your credit score, even if you already have good credit. This may not sound like a big deal if you don't plan on taking out another loan anytime soon but credit scores can also affect insurance rates and other financial aspects we don't expect. Employers can't directly view credit scores but can see payment history and indicators used in credit scores - which they may use to evaluate whether a person is trustworthy, reliable, etc so unless you're independently wealthy I wouldn't see taking out a loan for a short term as a total waste.

 

[Vanfam12345]

The only thing you lose is debt. Do it. Don't look back.

 

[Piet]

I finally found something available, but they won't sell it to me unless I finance. I want to pay in cash - but I want the van more, so just making sure I understand how this works.

Do I lose out on anything ($$) if I finance and then immediately pay it off? Is there some nominal interest I pay? Or if I literally call the next day and pay it off is it effectively the same as paying cash?

I did this when I bought my Sienna in May of 2021. We had to wait like two weeks for the finance company to get our info in the system and generate a payoff figure for us, but it was a fairly simple process

 

[fredly00]

Sounds like a crummy dealer.. you should be allowed to pay upfront. Carvana did this to us, we tried 3 different siennas system kept "bumping us out" finally found a Hyundai dealer with used one we wanted.

 

[floridanative]

Thanks! Yeah - "Next day" is probably an exaggeration. But quickly to avoid interest accrual...

As stated earlier, triple check the contract for pre-payment penalty or minimum number of payments. Then, go for it.

I did this with another car purchase (pre-COVID) because the dealer could give me a better price. As soon as I got the loan information, I requested the payoff and paid it off. Probably paid a month to 1.5 month interest. I still came out ahead from the cash price the dealer was willing to do.

-Mike

 

[bullfrog23414]

As others have said, it's not "next day." We took delivery 3 weeks ago and the credit union still isn't showing an active loan for me (I check in with them every few days). I'm not planning to pay off super early because my rate is 2.49% and I have my money doing other stuff for me (I Bonds etc.). I'll probably just pay more than is due over the life of the loan because I hate having debt even when the math is in my favor.

 

[schen72]

I would personally be highly annoyed at being forced to finance a car. I always just pay via cashiers check from my bank. My reasons are: no paperwork to keep of, I get the title right away, psychological distaste of financing a depreciating asset. You also don't need to disclose your SSN when pay with a cashiers check because it's as good as cash. But if you finance, I imagine a week or two later you can easily pay it by just sending a big check to the finance company. You'll end up paying a tiny amount of interest but nothing I'd be worked up about.

 

[2016 LE 805]

Just bought a 2016 at a Toyota dealer. My credit union had a 2.75% 48 month rate. The dealer offered to take $1,095 off the purchase price of the vehicle if I financed with Toyota financial at 5.09% for 48 months instead of using my credit union. I took that deal on 7/24 and paid off the loan via ACH on 8/2 by signing up for an account online before even receiving the welcome letter/initial statement from Toyota financial.

There is a $75 minimum finance charge in my purchase contract, but that amount wasn’t mentioned in the Toyota financial payoff quote letter, or included in the quoted payoff amount. Here’s a picture of what the minimum finance charge looks like on page 4 of my retail installment sales contract. The contract says “may be charged the difference” which to me implies the minimum finance charge might be applicable in some circumstances but not all circumstances.

 

[jkoenig24]

Check out "The Homework Guy" (Kevin Hunter) on his YouTube channel. He has a good video re DON'T say you're paying cash up front. LOTS of very good advice on vehicle purchases in his videos. Dealers actually make more $$$ in financing and sale of "add ons" that take place in the Finance Room then they get selling the car.

 

[Dimitrij]

I have only had two car loans (one through Ford financing and one through "my" bank), and both of them were pretty lenient on early payoff, lump sums etc. One thing to bear in mind that taking out a loan and paying it off "too soon" it will likely cost you some 15-20 points in your credit rating.

 

[h1k3rb]

I have only had two car loans (one through Ford financing and one through "my" bank), and both of them were pretty lenient on early payoff, lump sums etc. One thing to bear in mind that taking out a loan and paying it off "too soon" it will likely cost you some 15-20 points in your credit rating.

Good point. I don't know where the cutoff is but in the past I've waited 3-6 months to pay off a loan and it seemed to bump my score up slightly. I'll make a guess that it's however long it takes to establish a pattern of paying on time. If someone is in the habit of occasionally being late on payments then better stick to cash. ;-)

 

[Hoteker]

I’ve been in this type of a situation before. I had the loan and mine was open (no pre payment penalties) after 6 months.

 

[Holdme]

The dealerships get a kickback if they can get you to finance for 90 days. You pay it off before those 90 days and they have to pay it back, in many cases the salesman himself will have to pony it up. So most sales people will say the question you ask yourself is simple.

Was the salesman good? Did they sell the van to you at msrp with no ridiculous dealer addons? Did you just overall have a good experience buying the thing? If you answer yes to to all of the above then perhaps consider letting it run the 90 days and giving them the kickback..

If not, well...pay it off and enjoy.

 

[micoborromeo]

I financed with Toyota Finance because they had $500 cash back. Paid it off without any penalties.

 

[floridanative]

The dealerships get a kickback if they can get you to finance for 90 days. You pay it off before those 90 days and they have to pay it back, in many cases the salesman himself will have to pony it up. So most sales people will say the question you ask yourself is simple.

Was the salesman good? Did they sell the van to you at msrp with no ridiculous dealer addons? Did you just overall have a good experience buying the thing? If you answer yes to to all of the above then perhaps consider letting it run the 90 days and giving them the kickback..

If not, well...pay it off and enjoy.

I actually liked our salesperson a lot when we did the early payoff. We were up front and told him we would payoff early and make sure he put us in a loan that had no minimum length for them to get paid.

In a different but similar, non car loan situation, we were told that they couldn’t tell us to not payoff early but would really really appreciate it if we waited 90 days before paying it off. We did wait on that one.

So, if you like your salesperson, do ask the minimum time that they need the loan before payoff and use that information in your decision-making.

As to the credit score… if you have the cash to pay for it who really cares if your score takes a ding for a few months? If you are managing your money that well the score will recover pretty quickly.

-Mike

 

[fibber2]

The amount of the kickback to the dealership and the exact amount of days the loan contract needs to be in place before early payoff to close the loan varies by dealer and the arrangement they have with the finance company / banks that they use as primary lenders. It can vary from a month to a year. So know up front how soon you can pull the plug.

 

[hipertec]

I did this to two of my cars including our new Sienna. Just make sure there is no penalty to paying off the loan early. The dealer is just trying to make a few more $$ from the loan - so let them have their win, especially if they are selling at or below MSRP....then pay it off in 1-2 months. The interest rate for that 1-2 months is less than $100 (I assume).