Financial options on 2018 Mustang GT

[ivantwilliams]

Any financial experts in here? If so, your expertise would be welcomed.

Breakdown:
Car: 2018 Mustang GT
Finance: Bank of America.
Payments: High, with an interest rate of 6.78%
Term: 75 months.
Note: The financial portion is more than likely due to trade-ins, and difference in cost transferred from previous car

Help needed:
I would like to present my friend with suggestions, to help reduce the monthly cost, and even pay it off quickly.
So, looking for options, ideas or suggestions, on how to either reduce the monthly payment, or a way to pay it off quickly.

Thanks all

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[rebellovw]

Perhaps try PenFed credit union - only costs 5.00 to join. You may find a lower rate.

 

[Interceptor]

Since Ford is offering 0% now on left over 19s..it might be a cheaper car payment buying new from Ford.
If you are upside down on trade in, or really buried on trade in vehicle I would do a 12 month loan to make up difference if Ford won't finance the difference. I would really be leery of being buried in that much car payment. 3-5 years from now when the car is out of warranty with parking lot dings, the payment will be the same.

 

[Silver Bullitt]

You're kind of asking for the impossible to reduce the monthly cost and pay it off early. Without knowing more specifics it's kind of hard to say.

I'd suggest finding a payment calculator and running some scenarios assuming you know current balance and friend's budget. Your friend's credit is going to determine how good of an interest rate he might qualify for. Shorter term loans will be at lower rates than longer term loans, but the term will have the biggest impact on the monthly payment amount. Credit unions are typically a pretty good source for lower interest car loans if he has access to that.

Personally, I would never buy more car than I could afford to finance over 4 years at the longest. Car loans for more than 60 months are never a good financial decision unless you are getting a subsidized rate less than 2%. 6.78% for 75 months is horrible. The only time you should even consider something like this is for manufacturer financing rebates with the full intent of refinancing after making a couple of payments.

 

[ivantwilliams]

Understood, thanks for the responses thus far. Keep them coming.
He was saying that he's looking into the Ford 0% financing, that might be an option. Plus, the excess from the trade-in, might have to be a separate loan, as someone else stated. He's just not sure if that will work out well. He states that his credit is good, in the 730's, even with Covid-19.

 

[302@12psi]

This is dumb. This person is not in a position to afford the car. The fact the payments are "high" and almost 7% interest along with what appears to be negative equity is very telling.

Tell the friend they can't afford a Mustang GT and should really focus on their finances for a bit and perhaps in a year or two would be in a position to afford the car.

Likely not a popular idea here...but since the vast majority of Americans are carrying THOUSANDS in credit card debt and do not have access to 2,000 in cash is very telling. Covid 19 or not.

 

[Shifting_Gears]

Bad rate for the age of the car and credit score. Rolling negative equity into a loan on top of that is a bad financial decision.

Look for Ford Certified Pre Owned. With qualifying credit you can get 2.9-3.9% financing.

What is the purchase price of the car and how much negative equity are we talking about with the trade? Either way, 6.78% is NOT a good decision.

There’s three ways to reduce the monthly:
1st - lower interest rate
2nd - put cash down
3rd - get the highest trade in value possible, negative equity is bad

 

[B0N35]

Finance: Bank of America.
Payments: High, with an interest rate of 6.78%

He states that his credit is good, in the 730's

With Bank of America? Is the subject car a private sale? Reason I ask is that BoA is offering rates "as low as" 2.99% for used from a participating dealer... 5.49% for private sales.

 

[ivantwilliams]

With Bank of America? Is the subject car a private sale? Reason I ask is that BoA is offering rates "as low as" 2.99% for used from a participating dealer... 5.49% for private sales.

No, no. Those are the details of when he purchased the car a few years ago.

He is trying to figure out the best way to reduce his monthly payments, and get the remaining finance amount into the realm of the cost of the car. I feel as if the rollover amount from his previous trade, around $18K is where the issue is.

 

[Shifting_Gears]

No, no. Those are the details of when he purchased the car a few years ago.

He is trying to figure out the best way to reduce his monthly payments, and get the remaining finance amount into the realm of the cost of the car. I feel as if the rollover amount from his previous trade, around $18K is where the issue is.

Wait - so the vehicle has already been purchased.

$18k in NEGATIVE equity was rolled into the purchase at almost 7% interest?

If so - the only thing that can reduce the loan balance is to try to refinance to a lower interest loan. At this point it may be very difficult to do that.

 

[ivantwilliams]

Wait, what? Rolling in $18k in negative equity?????? Does this friend realize how much in interest ONLY he’d be paying on ONLY the negative equity?!

It’s not possible do drive the loan down with that.

He sent me a screenshot earlier of the loan document. Decent amount onnthe trade in value. But, it seems there were two other trade ins from years earlier. So the negative equity is rather high.

Sounds like he merely needs an injection of cash into the amount owed.

 

[Shifting_Gears]

He sent me a screenshot earlier of the loan document. Decent amount onnthe trade in value. But, it seems there were two other trade ins from years earlier. So the negative equity is rather high.

Sounds like he merely needs an injection of cash into the amount owed.

I re-wrote my post after re reading the original message. But yeah, not much he can do other than throw money at it to pay it off early or try to find someone willing to refinance at a lower rate. Making a big payment won’t change the monthly payment, just the balance owed and duration of the loan left.

The best bet would probably be to put as much “lump sum” as possible into paying it down, then looking to refinance if he can find a lower rate.

 

[Classic Lover]

This is dumb. This person is not in a position to afford the car. The fact the payments are "high" and almost 7% interest along with what appears to be negative equity is very telling.

Tell the friend they can't afford a Mustang GT and should really focus on their finances for a bit and perhaps in a year or two would be in a position to afford the car.

Likely not a popular idea here...but since the vast majority of Americans are carrying THOUSANDS in credit card debt and do not have access to 2,000 in cash is very telling. Covid 19 or not.

I agree, save up some money before you jump in over your head. That’s what I’m trying to do.

 

[ivantwilliams]

Albeit, I agree somewhat. We all have made all sorts of mistakes. Even I have make some Financial ones, too.
But, I will say, since he is now fully aware, and trying to do something about, that is progress.

PS: I would not point the finger at financial stupidity to an American. As far as I am concerned, things like this probably happen all over the World.

This is dumb. This person is not in a position to afford the car. The fact the payments are "high" and almost 7% interest along with what appears to be negative equity is very telling.

Tell the friend they can't afford a Mustang GT and should really focus on their finances for a bit and perhaps in a year or two would be in a position to afford the car.

Likely not a popular idea here...but since the vast majority of Americans are carrying THOUSANDS in credit card debt and do not have access to 2,000 in cash is very telling. Covid 19 or not.

 

[FreePenguin]

Nothing wrong with debt, only wrong if you cant afford the debt.
Ive been carrying debt for years, paying and accumulating. As long as you're happy at the end of the purchase, and enjoy the purchase. Get it.

If I wasn't able to afford the payments though, and it would stress my life out. I wouldn't do it.

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