Hi folks, here is following situation. I’ve offer on ~100k car and if I finance with dealer, then they will not be doing $2.5k ADM, but rate is 5.99 which is much higher than I can get through CU(yep they are raising as well, but still seems under 3% possible). Would it make sense to finance at 5.99 and then refinance in few month or better to lock into let’s say 2.8% now and pay ADM?
If you can get a refi rate as low as the purchase rate, hell yeah. If not, do the math and run the numbers, chances are you’ll still be saving money vs. 2.5k ADM.
That’s the thing, that rates are changing rapidly, so probably nobody knows what it will be in few month. That refi which I can get now, wouldn’t be applicable in few months.
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A 100k loan at 6% v 3% is 8k more on a 60 mo term. Its a bet if youre willing to risk 8k to save 2.5k.
Realistically, most terms allow you to refinance immediately with no penalty. So no ADM would be best
True, but also 8k is worst case scenario, if I will not be able to find better refi rate in 5 years and keep car for whole term
Don’t forget that ‘refinance’ is a higher rate since the car is used at that point.
Have you tried contacting other dealers who can sell you the car at MSRP and not care whether you finance with them? What car is it? Is it on the lot or an order?
No sarcasm, are you asking a question about the math, the ethics, or what the crystal ball says?
When are you taking delivery?
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You can and should immediately refi a bad, marked-up captive loan. One thing to check is title holding details and timing for your state. This will be a checklist item to close a refi.
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Do it, buy out the loan with a CU loan, for NJ I’d say check locals, or Affinity, or IDB.
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I would say more about math + ethics. I’m pretty sure people here had experiences like this, so if somebody can share details/lessons learned, that would be great. Car is in transit, so most probably end of month delivery.
Thanks Matthew, in first place I might not do it, hence the question if it even make sense to do it in order to avoid $2.5K markup. As I had no experience with this process, can you please explain a bit more details about title holding details and timing? Should it be checked with potential captive lender or somewhere with NJ state officials? And how exactly it impacts refi process?
This isn’t universally true. 
I just did it although at a much smaller scale. Bought car…financed…walked out and within two weeks was moved to my CU. In my case it went from 2.99 to 1.99. Original lender had not received title yet but they said they would forward to CU once they did. I will be sure to keep the lien satisfaction letter and prob follow up with the CU in a few weeks just to be sure. I could not get the car anywhere else and I was getting a good deal, didn’t want to put a monkey wrench in the deal so I did the fastest easiest thing.
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A lot of the credit unions give the “new car” rate on refinances that are the current model year. I purchased a car last year with a loan from the dealer and refinanced it 45 days later with PenFed and I got the new car rate
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I’ve been contemplating a similar dilemma, I have a new Jeep coming in and dealer is taking $1k off for taking CCAP loan. Dealer says I have to wait 90 days before refinancing … do I?
True true, there are always a few banks who dont.
DCU (Digital Credit Union) has the same rates for both new loans and refinance loans. The rates have went up, but you can still get 3.24% for up to 65 months. It also has a 130% LTV.