How do my loan terms look?

"LJ909" (lj909) 03/18/2019 at 10:19 • Filed to: auto loans, Finance

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Stock photo from...I don’t know where

Remember those bad auto loans I used to post? Well I used to like the input I would get on them. Especially considering how they highlighted how bad auto loans were/are getting. But I never really got into my auto loans. So here they are.

On my old Sonic as I had went over before, my credit was so so at the time. Being a young father working and going to school, I was tired of taking the bus so I needed a car. So I went to Hertz Auto Sales and got into a 2013 Sonic. The car was on sale for $9800, down from just under $12 grand. With an 18% APR, I put $2500 down for 72 months at $199 a month. The $199 a month was great, but the APR was atrocious.

Fast forward a few years when the Sonic started going bad at about 141,000 miles, and I trade it off onto the 2018 Sonata. I honestly think I got a good deal because it could have been worse. I had paid my Sonic down to just under $5 grand. Now I’ve explained what happened before, but let me touch on it quickly to show how one dealer was bullshitting me and another gave me a deal.

The first Hyundai dealer I went to (Cardinale Way Hyundai) wanted me to put $2500 down, with them giving me $500 for trade in for my Sonic with a 11% APR at $480 a month for 75 months. It was a nope from me.

The second dealer I went to where I ended up getting my car (Riverside Hyundai) gave me a good deal in my opinion. My credit mind you is better, but still so so, but better than it was when I got the Sonic. I gave them $1000 down and they gave me $2500 for my Sonic, WITH the engine troubles it was having, with a 9% APR for 72 months at $452 a month. Not bad considering. Could be better of course, but could be way way worse.

E90M3 > LJ909 03/18/2019 at 11:23

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$452 for 72 months for a Sonata!?!?! Holy shit! 

facw > E90M3 03/18/2019 at 11:28

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Well some of that is essentially still paying off the Sonic since he was underwater on that . Still sounds like a lot.

E90M3 > facw 03/18/2019 at 11:29

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My reaction was the amount, not how he ended up there. I understand people get there for different reasons, but that doesn’t change the payment amount. 

Arrivederci > LJ909 03/18/2019 at 11:37

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Not good - I get that your credit isn’t great, but if you’re going to have to pay a higher APR, go for the shortest term you can.  One, it’ll generally get you a better rate and, two, you’ll be paying less interest as a result of the shorter term.  Yes, you’ll be able to afford a smaller purchase price to end up at the same monthly amount, but it’ll be worth it to improve both your situation and credit score.

Ash78, voting early and often > LJ909 03/18/2019 at 11:46

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Well it sounds like you’re moving in the right direction. I’m not going to be someone who balks at the APR, since I used to work in subprime/near-prime auto loans and have seen a lot worse. But I’ll give you two quick tips:

1. If you can swing an extra $50/mo on that car payment (just round it up to $500), it will cut your interest expense down a lot.

2. Keep working on your credit score. As soon as you’re over ~ 650 or so, find a credit union and see if they can refi it for you (don’t extend the term, just get a new lender). You should be able to get closer to 5% or so, usually with very little -- or no -- extra fees for the privilege.

CompactLuxuryFan > LJ909 03/18/2019 at 11:51

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Well you’re definitely up there with a very luxurious lease. Unless your credit is * really* bad, I feel like something went very wrong for you to acquire negative equity in a brand new car over 140,000 miles. The biggest red flag for me is if you have low odds of gaining some positive equity in the Sonata, because then you’re stuck in a death spiral. Do you drive a lot? Hard to comment on specific circumstances, but a tried and true way of increasing the equity you’re able to build is by going for something with a lower purchase price. 

BeaterGT > Ash78, voting early and often 03/18/2019 at 11:58

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Exactly my thoughts. Not the best or the worst terms I’ve seen but certainly room for improvement. Some credit score work and lender shopping will go a long way.

Highlander-Datsuns are Forever > LJ909 03/18/2019 at 12:00

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I would do everything in my power to pay that loan off faster or get it refied in a year or two for a lower APR. I think 6 years is too long for an auto at 9%, if it was one of these 1-2% loans and amounts to free money that would be different.

LJ909 > E90M3 03/18/2019 at 12:20

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Could be worse thats how I see it. My girls coworker is paying $560 a month. For a base Versa.

LJ909 > Ash78, voting early and often 03/18/2019 at 12:23

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This is a good idea. Thanks. I could swing the the extra $50. I was actually thinking about paying a few hundred more from time to time when I can as well.

LJ909 > Arrivederci 03/18/2019 at 12:26

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True. But then I’ll be paying 6-700 bucks a month. For a Sonata. I wouldnt do it at that point.

Eric @ opposite-lock.com > CompactLuxuryFan 03/18/2019 at 12:26

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Considering he put probably 100k miles on his car in under 3 years (based on the residual on the original loan) and that the Hyundai dealers he went to were in the 909 (Corona and Riverside), I’m going to say he’s a supercommuter from the IE. Cars are almost a necessity out there and you really need something you can comfortably drive in traffic for 3-4 HOURS a day. The cost is crushing, but it’s what you pay to be within commuting distance of Los Angeles if you’re in a lower-paying job . Definitely a precarious situation, but people make it work. I have family members that live out there, drive cars to 300k+ miles, and still seem to replace them frequently.

The Hyundai is likely to, with maintenance, outlast the loan. The Sonic suffers from GM Korea (Daewoo) quality and was a beat on rental car before he bought it, as well.

If it was 10 years ago, I’d say his best bet would be to purchase a lower-mileage 00s-era midsize domestic for $2000-2500 (because they were really selling for that ) and drive/maintain it until it literally fell apart, saving the car payment minus the maintenance every month.

Ash78, voting early and often > LJ909 03/18/2019 at 12:29

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Good idea...if you can swing the extra cash, though, see what kind of rate you can get for 48 or 60 months. It might be a lot better...but if not, just keep the 72 and make the extra payments. Then at least you have flexibility if you run into cash flow issues later.

BeaterGT > LJ909 03/18/2019 at 12:30

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Be sure any extra payments go right to principal.

LJ909 > CompactLuxuryFan 03/18/2019 at 12:30

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Yep I drive. A lot. Well not so much anymore since I work from home. Thats where that 140,000 miles came from.

facw > E90M3 03/18/2019 at 12:33

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Fair enough, but I think it’s a valid distinction to say they aren’t paying for a Sonata, they are paying for a Sonata + a $2500 cash loan.  

Mercedes Streeter > LJ909 03/18/2019 at 12:33

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Coming from someone with chronic credit problems (not going to be helping my parents with anything anymore ) from a family with chronic credit problems (*sigh*), it could be worse...way worse.

My mum is throwing $600/mo down the drain on a 2011 Expedition with nearly 200k mi. When you include finance charges and APR, she will pay double the price that was on the window when the loan is done. The thing was underwater the second it left the lot.

With your loan your Sonata will likely be underwater very soon as well. It’s not crazy bad, but I would second Ash’s opinion and trying to refi for a better rate when you can. :)

LJ909 > Mercedes Streeter 03/18/2019 at 12:49

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Yea that’ s how I see it. Could be better, but also could be way worse. I do expect to be under some due to me driving a lot. But yea I’ll do what I can to make bigger payments to beat that interest . I hope your mom gets done with hers soon as well. 600 on a car thats over 8 years old is crazy.

LJ909 > Eric @ opposite-lock.com 03/18/2019 at 12:55

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You hit the nail on the head. I was, until recently, commuting from the IE to Long beach. Doing over 140 miles a day. But that changed since I work from home now thank god. The Sonata got the job done in comfort and got better gas mileage than the Sonic which I still find crazy. I would average just under 30 in the Sonic and it had the 1.8. My Sonata? Cruising in Eco mode I can average 42-45 mpg which is insane to me.

The Hyundai is likely to, with maintenance, outlast the loan. The Sonic suffers from GM Korea (Daewoo) quality and was a beat on rental car before he bought it, as well.

This too as well. When I got the Sonic it already had just over 51 thousand miles on the odo. I’m glad I got rid of it when I did..

Eric @ opposite-lock.com > LJ909 03/18/2019 at 12:55

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The way people live in the 909 still blows me away... I just can’t fathom it. A lot of people do it up here, so it’s not exclusive to the area, it was just developed and tested there.

LJ909 > Eric @ opposite-lock.com 03/18/2019 at 13:00

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Well the housing is still cheaper. LA and OC counties are still crazy. The same 5 bedroom 3k sq ft house thats nearly a million in LA county will be 4-500 grand in the IE. But theres a limit though. Anything past Ontario/Fontana and some parts of Riverside is crazy to me. People are moving farther and father out. I know a lot of people that do Hemet/Temecula/Murrita to LA,Irvine etc. Its insane.

Arrivederci > LJ909 03/18/2019 at 13:22

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Exactly - that’s when you buy the leftover Elantra instead . Reducing the purchase price lets you carry a shorter term and (usually) a lower APR.

Eric @ opposite-lock.com > LJ909 03/18/2019 at 13:23

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My family that lives out there are in Ontario and Rancho. The housing still seems expensive for the distance, but I guess when I compare it to where I live it might be a better deal (my place was much more expensive, is a solid hour from downtown, and is even further from major employment centers if you don’t have a downtown job). I can’t fathom a commute from Hemet or beyond, though I did know someone that was doing a Fallbrook to East County SD commute every day...

I grew up about 20 minutes outside downtown Los Angeles, which is deep suburbs in my mind . Any commute in excess of about 10-15 minutes drives me insane, yet I now live about 25-30 minutes from any employer that might pay enough to afford my house payment today because nothing was affordable.

LJ909 > Arrivederci 03/18/2019 at 13:34

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Yeah actually looked at the Elantra. But with me having a kid I needed the space. And I didn’t wanna go from one cramped car to another, especially with the price difference not being much. And weirdly the Elantra didn’t have any rebates. The Sonata did. 

LJ909 > Eric @ opposite-lock.com 03/18/2019 at 13:38

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Where are you if you don’t mind me asking?

The frustrating part is that the traffic is a part of life here sadly. Growing up in Ontario I can tell you that downtown LA without the traffic is a good 30-33 min drive which isn’t bad. But that was 15-20 years ago. All commute  times have exploded because of all the people here and it’s crazy. But the housing is pricey but still more expensive. You have to go out to Beaumont or Banning to find housing under 400 grand. And it’s not worth it. 

Arrivederci > LJ909 03/18/2019 at 13:39

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The Elantra is pretty far from cramped. It certainly isn’t nice as a Sonata, but it babies with aplomb, well, at least in the week where I had one as a rental and used it to make Costco runs and shuttle the kiddo around.

Eric @ opposite-lock.com > LJ909 03/18/2019 at 14:13

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I live in a suburb/exurb of the greater Seattle area.

It’s hard to come up with a rough equivalent in the greater Los Angeles area; where I live is probably most similar to Flintridge (from housing quality to the type of people that live there to light isolation) , except with commute times/frustrations similar to living in Palmdale. I can’t come up with anything down there that could describe my commute, it’s 13-15 miles each way, all 2-lane surface streets, with traffic.

The problem is that employers are so far from where people can afford to live anymore . West of Lake Washington a house like mine would be a few million and you’d be hard pressed to make 5 x what I make now...

CompactLuxuryFan > LJ909 03/18/2019 at 14:45

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Definitely sounds like you’re not in a spiral, then, which is what matters most. Working from home seems to be truly life-changing in this scenario. Congrats, and good luck ! You’re gonna be in such a better place before you know it!

LJ909 > CompactLuxuryFan 03/18/2019 at 15:55

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Thanks!

Dru > LJ909 03/18/2019 at 16:55

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Sounds like you’ve made serious progress, so good onya there.  I have no idea how my credit got as good as it is, but my score is around 830.  I’ve had a mortgage for about 6 years with on time payments since inception.  Maybe that helped.  Also I use my credit cards all the time and pay them off, or almost pay them off every month.  Seriously I will go buy a few odds and ends from Target for $30 and pay that off when the statement comes.

LJ909 > Dru 03/18/2019 at 18:32

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Thanks. But Yea that’s what  I did when I had credit cards. I would pay what I used which honestly is the way to do it.