Auto refinance scenario

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Post Reply
Topic Author
sedonabogle
Posts: 33
Joined: Thu Jan 31, 2019 2:08 pm

Auto refinance scenario

Post by sedonabogle »

We purchased a new car late April, financed due to incentives and got a 60 month loan at 2.89%. Original loan amount was $31k, paid it down to $24k already.

Penfed quoted me 2.99% for 36 months at their best rate for me plus a $250 bonus. I have a $25k Ally no penalty CD expiring in July ($75 more interest to go) at 2.3% that I was going to pay this off with regardless of original bank or Penfed. I don't like a higher rate, but given my numbers does it make sense to switch to Penfed, get the $250, and pay it off using Ally no penalty CD right away? There's no saying when the $250 bonus will expire so I think it's best to do this now.

Just want to make sure I'm not missing anything obvious. There are no prepayment penalties and I already have other finances covered. If CD rates were higher I would've kept some in there but at this point I'd rather pay off the car. Thanks!
User avatar
BrandonBogle
Posts: 3600
Joined: Mon Jan 28, 2013 11:19 pm

Re: Auto refinance scenario

Post by BrandonBogle »

The Penfed $250 bonus terms and conditions say it will be paid out after 90 days and after at least one payment is made on the loan. So you would end up having to pay off the loan later than July when the CD matures. Keep that in mind when comparing the numbers.
Goal33
Posts: 1581
Joined: Sun Apr 12, 2015 12:30 pm

Re: Auto refinance scenario

Post by Goal33 »

I'd keep the original loan and pay off in July...

If you're dying for some free money along with a credit hit, do something easier like apply for a new credit card with signup bonus.
Topic Author
sedonabogle
Posts: 33
Joined: Thu Jan 31, 2019 2:08 pm

Re: Auto refinance scenario

Post by sedonabogle »

The $250 rebate will be deposited to the membership share savings account within 90 days of the loan disbursal date. In addition, the first payment on the PenFed loan is required prior to the $250 deposit. PenFed may discontinue or change the promotion at any time. Other restrictions may apply.
From the way I read it, I could pay it off immediately which would be the "first payment" and the $250 goes to a savings account, not the loan. Why would I have to wait? I can ask the rep again but it seemed like I'd be able to pay off immediately and get the $250 in my savings account there.

I don't know if it's worth to wait for the CD to mature. It's at a lower rate, can be closed early without penalty, and that $75 interest remaining will really be less due to taxes.
Topic Author
sedonabogle
Posts: 33
Joined: Thu Jan 31, 2019 2:08 pm

Re: Auto refinance scenario

Post by sedonabogle »

Goal33 wrote: Tue May 19, 2020 11:52 am I'd keep the original loan and pay off in July...

If you're dying for some free money along with a credit hit, do something easier like apply for a new credit card with signup bonus.
Already took the hit when applying for the loan. I did the $200 Penfed checking bonus so figured I'd get this $250. No more events in the next 5 years I'll need to apply for more credit. Don't care for more credit cards, already have 3 that cover the bases for me.

I'm not dying for free money, just looking to pay this off and save the most money.
User avatar
BrandonBogle
Posts: 3600
Joined: Mon Jan 28, 2013 11:19 pm

Re: Auto refinance scenario

Post by BrandonBogle »

sedonabogle wrote: Tue May 19, 2020 11:56 am
The $250 rebate will be deposited to the membership share savings account within 90 days of the loan disbursal date. In addition, the first payment on the PenFed loan is required prior to the $250 deposit. PenFed may discontinue or change the promotion at any time. Other restrictions may apply.
From the way I read it, I could pay it off immediately which would be the "first payment" and the $250 goes to a savings account, not the loan. Why would I have to wait? I can ask the rep again but it seemed like I'd be able to pay off immediately and get the $250 in my savings account there.

I don't know if it's worth to wait for the CD to mature. It's at a lower rate, can be closed early without penalty, and that $75 interest remaining will really be less due to taxes.
My comment on waiting until after July was based on meeting the 90 days. That would put you in late August/early September, even if you paid off the loan with the "first payment". I agree with others that this seems like much work for too little gain, especially given the new loan would have a higher rate (even for a short time). Last year I did a $300 promo for opening a Capital One credit card. Since it was a rebate on spending, there is no 1099 (rebates aren't taxable). That seems to be a good bit more advantageous here than switching your auto lender.
jbmitt
Posts: 548
Joined: Mon Jul 14, 2008 1:00 am

Re: Auto refinance scenario

Post by jbmitt »

We had a PenFed savings account through a student loan refinancing. I also refinanced our auto loan to their 2.99% rate from a longer term and higher rate. (I wish I had waited to buy until now for the 0% offers). We also added the checking account and I've funded it and made the debit card transactions. I'm expecting bonuses of $250 for the car loan, and $200 for the checking account from them.

I don't think I'd refinance to a higher rate just for a bonus. That seems like a lot of work. Others have pointed out you may be better served by credit card sign-ups. I believe that PenFed is offering $100 on their good credit cards, still lower than some other options.
Topic Author
sedonabogle
Posts: 33
Joined: Thu Jan 31, 2019 2:08 pm

Re: Auto refinance scenario

Post by sedonabogle »

jbmitt wrote: Tue May 19, 2020 12:14 pm We had a PenFed savings account through a student loan refinancing. I also refinanced our auto loan to their 2.99% rate from a longer term and higher rate. (I wish I had waited to buy until now for the 0% offers). We also added the checking account and I've funded it and made the debit card transactions. I'm expecting bonuses of $250 for the car loan, and $200 for the checking account from them.
Their website is basic but the rates seem to be the best. I originally hoped to get a 0% from the dealer but if I went that route I would have lost access to a few thousand in cash off. Since I had cash to pay off in 3 months I decided it was worth doing what I did.

I already went through the application process so as far as I'm concerned it's not any more work. I think I made it sound more complicated than it really is from the original post.
Jack FFR1846
Posts: 13068
Joined: Tue Dec 31, 2013 7:05 am
Location: 26 miles, 385 yards west of Copley Square

Re: Auto refinance scenario

Post by Jack FFR1846 »

2.49% at DCU up to 65 months. But there's no bribe money in it for you. :D
Bogle: Smart Beta is stupid
hayhayday
Posts: 61
Joined: Tue Jan 15, 2019 12:42 pm

Re: Auto refinance scenario

Post by hayhayday »

If your going to pay off anyway in ~2 months seems worthwhile to pay an extra $5 in interest to get $250. Penfed gives you a few months to send them the title so you can prob avoid having lienholder changed and just pay off when they send letter asking why title hasnt been sent in yet.
Topic Author
sedonabogle
Posts: 33
Joined: Thu Jan 31, 2019 2:08 pm

Re: Auto refinance scenario

Post by sedonabogle »

Jack FFR1846 wrote: Tue May 19, 2020 12:24 pm 2.49% at DCU up to 65 months. But there's no bribe money in it for you. :D
Interesting, never heard of that one.

Penfed was "as low as 2.14%" which is why I went down this path in the first place thinking I'd get that. My credit score probably got knocked down from the original loan so I didn't get that rate. But 2.99% and $250 still make it worthwhile if I was going to pay it off soon anyway.
Topic Author
sedonabogle
Posts: 33
Joined: Thu Jan 31, 2019 2:08 pm

Re: Auto refinance scenario

Post by sedonabogle »

hayhayday wrote: Tue May 19, 2020 12:25 pm If your going to pay off anyway in ~2 months seems worthwhile to pay an extra $5 in interest to get $250. Penfed gives you a few months to send them the title so you can prob avoid having lienholder changed and just pay off when they send letter asking why title hasnt been sent in yet.
Good to know, thanks
cogito
Posts: 229
Joined: Fri Nov 30, 2018 2:12 am

Re: Auto refinance scenario

Post by cogito »

I just tried this with PenFed, and it went very poorly, it felt like a bait-and-switch. They quoted me 2.89% on a 60 month new car loan with the $250 bonus, and I applied. They did a hard pull immediately, then after 2 weeks of trying to get them the correct supporting documents using multiple online portals that didn't seem to communicate with each other, calling, waiting on hold, they emailed and told me congratulations, I was approved for 60 months at 3.99%, which is... more than the new car loan I already have. I just cancelled, was tired of the hassle. Some customer service rep called me shortly after to tell me it was probably because I had bad credit and thanks for the example, it would be very instructive for her to use as a team training exercise. :annoyed
Topic Author
sedonabogle
Posts: 33
Joined: Thu Jan 31, 2019 2:08 pm

Re: Auto refinance scenario

Post by sedonabogle »

cogito wrote: Tue May 19, 2020 12:45 pm I just tried this with PenFed, and it went very poorly, it felt like a bait-and-switch. They quoted me 2.89% on a 60 month new car loan with the $250 bonus, and I applied. They did a hard pull immediately, then after 2 weeks of trying to get them the correct supporting documents using multiple online portals that didn't seem to communicate with each other, calling, waiting on hold, they emailed and told me congratulations, I was approved for 60 months at 3.99%, which is... more than the new car loan I already have. I just cancelled, was tired of the hassle. Some customer service rep called me shortly after to tell me it was probably because I had bad credit and thanks for the example, it would be very instructive for her to use as a team training exercise. :annoyed
Very insightful, thanks for that. Sorry you had to go through that, maybe I'll stay with the current bank. I have noticed their website is basic for lack of a better term.
Post Reply