[jss12636]

Hello, everyone! Long time reader but don't post often.

Read my life story and help me make some decisions/planning. I thank you in advance.

I am 23 years old, recent college grad (past May) and working full-time for a largish company in Buckhead in Atlanta, Georgia. I make decent money, while by no means am I drowning in it, the bills get paid. I absolutely love cars, and love BMWs, with this being my second one.

I purchased a CPO 328i Coupe with 36K on the odometer for $23,500 from United BMW in Roswell, GA. I had terrible credit-and in hindsight the timing of the purchase was bad, I realize that. At the time I was having being approved for even secured cards so I thought paying loans might help it recover- seeing as I needed a car anyways. Long story short... I know I'm paying too much for this car and want to pay it off as soon as possible. My interest rate on the note is 7.95 %. The total purchase price was $30,314 and I put $5k down so I had a loan of $25314. The finance charge is about $4500 of that and my current payoff is $19,302, I believe. I received a two payment credit from BMWFS and payments payments are $421.91, though I've been paying $500. Insurance adds on another $200. Plus, I have another couple of bills totaling $170 a month. So I am liable for $870 per month as of this time. This is about 1/4 of what I bring home a month, roughly. I want to maintain and expand my savings as I have limited access to credit too.

My question is this... how soon should I pay it off? Should I increase the payments more? Should I pay double? Could someone be super generous and help me with some math? Currently, by paying the extra $79 a month I am basically paying the interest for one year which is $910 ($4500 total interest/ 5 years = 910) and the extra $78 equals about $936 per year). I plan on keeping this car for a while- is 200k miles possible? I'm a huge believer in preventative maintenance and stay on top of things....though I do enjoy driving spiritedly. It's an auto (LOL) but should I get it flushed? I currently have 48K on the clock.

How much do I need to pay if I want to pay the total loan off completely in 4 year? 3 years? Credit is still pretty bad so I think re-financing does not make sense at this time. What do you suggest? I'm itching for a 335i or 435i but I know this is not the time to buy- I need to wait until I have more money saved up, am further into my career, credit improves, and insurance becomes cheaper.
I hope this is an appropriate place to post this. I know it's not all about the car but I figured there's some wiser people than I on this forum that she the same love for cars and have gone through similar situations (or smart enough to avoid it).

Best regards,
Jay

[Maestro]

Just pay it off, as quickly as possible it will not hurt your credit rating it most likely will help, ability to pay debt goes in your favor. especially high interest debt.

I assume you have debt from school at a lower interest rate, use they to strengthen you credit rating.

If you want to know the exact payment amount their are finance calculators on the web which you can put in your balance, interest rate and the payback period, and it will tell you how much you have to pay each month and how much total interest you pay over the life of the loan.

Also watch when you over pay some banks will not apply the over payment to the balance until the over payment equals a full months payment. It is a game they play. They some time require you to tell them each and ever time you make and extra payment how to apply it otherwise they sit on it.

[bloppitybloop]

What is your credit score and do you have any other credit cards or loans? If you have credit cards, get your credit utilization down and keep paying on-time. If you get your EQ 04 score above 675, you could re-finance through DCU at 1.49%. Meanwhile it may help to throw extra money toward your principal balance to keep from being underwater on the loan.

[Delta0311]

You kind of fucked yourself financially this is why I always say to avoid getting a expensive car till you are financially established. Otherwise most of your money will be going into paying off the car and possible repair bills.

Put the car in your parents name and have them refinance with their bank. If they have good credit then they can easily get a loan within a 2%(or lower) - 3% range. Then just pay them the monthly payments plus extra to pay it off quicker.

[shadow191]

7.95% is high, but it's not terrible. At least you're not in the teens. I wouldn't go paying double on the car yet just to get rid of the note. If you don't have access to much credit, you're right to try and increase your savings account. I'd do that before making extra payments on the car. If things go south and you lose your job, you're going to need the savings. If you don't have savings because you put all that extra money into car payments, you'll regret it. For most people cash in hand is always better than tied up in an asset, even if you have to pay some interest to keep cash around. It's why all the financial people tell you not to do anything until you have 6-8 months of expenses saved up. Equity in your car isn't going to pay your rent.

I actually live in Buckhead so if you ever see a lime green E92, that's me.

[jss12636]

Originally Posted by Maestro

Just pay it off, as quickly as possible it will not hurt your credit rating it most likely will help, ability to pay debt goes in your favor. especially high interest debt.

I assume you have debt from school at a lower interest rate, use they to strengthen you credit rating.

If you want to know the exact payment amount their are finance calculators on the web which you can put in your balance, interest rate and the payback period, and it will tell you how much you have to pay each month and how much total interest you pay over the life of the loan.

Also watch when you over pay some banks will not apply the over payment to the balance until the over payment equals a full months payment. It is a game they play. They some time require you to tell them each and ever time you make and extra payment how to apply it otherwise they sit on it.

Thank you for taking the time to read and respond!

I actually graduated with almost no debt for school...thanks to the Georgia Hope Scholarship-which every GA student can get provided they keep their GPA up.

So you're saying I need to call BMW FS and the them how to apply the extra money I pay? I should be applying the extra payment towards the principal balance, right?

[Delta0311]

You shouldn't even look at a 335/435 till you have good credit and are making over $70k+.

[Nitrousbird]

Hit up a credit union to see what they can do for you.

There is a difference between bad credit and a lack of credit history. I assume you have been doing these payments for at least a few months. That alone will help with the credit history (but may not be enough to qualify you). A co-signer would resolve any approval issues.

If you do refinance, make sure to do so with a term that is the number of months (or less) you have on your current loan so you don't stretch the payment timeframe out longer.

Remember, if you pay off early you pay less interest, so the total loan amount (when including interest) would go down.

Also, your numbers don't quite add up. I am assuming a 60 month loan:
Purchase Price: $23,500
Tax, Title, Fee's: Different everywhere, assuming 8% of price, $1880
APR: 7.95%

Total Payment with $0 down: $514.01
Total Payment with $5000 down: $412.75

Did you get hosed on fee's? Super high sales tax rate? Not sure why you are paying $421/month instead of $412.

[Dark_Knight_335]

Going onto E90post for financial advice is like going to a whorehouse to become an ordained priest.

[belcom]

Cars are a constant expense no matter if you lease, finance or own. They just depreciate and loose value. Since what's done is done, just keep paying the bills and save up. Definitely don't make any radical decisions to own even a more expensive vehicle at this time. What you save can be applied later to buy a house for example. Much smarter investment imho. Focus on your career as well. If you do it right, your income will only grow. And once it does, then think about getting a nicer car. Balance it properly and all will be good. Credit can only be fixed with time and credit repayment. It'll take time. Get a small secured credit card and pay your bills with that however pay it off religiously and it will help rebuild credit quicker.

by the way, I got my 335xi for about $35K CDN or $40k taxes in with 3 years/160k CPO. That's about $30k USD. so what you paid for a 328 seems high to begin with.

[bloppitybloop]

I would also suggest asking on the MyFico forums. There are a lot of helpful people there.

http://ficoforums.myfico.com/t5/Auto...bd-p/autoloans

[Needbmwpartzz]

As posted earlier.....have 6-8 months living expenses saved first.....then start paying off highest interest debt first.....cash is king should the proverbial sh!t hit the fan........build wealth like a building and should you need it take bits off till you generate more to continue construction.
Goodluck!

[bender rodriguez]

Originally Posted by Delta0311

You shouldn't even look at a 335/435 till you have good credit and are making over $70k+.

That would rule out tons of second hand owner bmw drivers. The cars are dirt cheap used and the 328i is easy to fix and costs no more than a honda civic.

[OP3NAIR]

IMO, we've all done some arguably stupid stuff in our time, this isnt that bad of a mess.
The interest rate is high, but its not so bad. Your interest calculation is wrong though. You pay more interest in the first year while the balance is higher, and it goes down as the loan principal drops. Paying $500 is a decent way to knock a couple months off. If you can do $600 without it hurting (pays off about 4 months faster), then pay that (If you figure out what you're spending to go out to lunch at work and start packing it instead, you'll find 100 bucks real fast). I usually just get sick and tired of paying for cars and lump sum pay them off when there's a couple grand left. If you're worried about the interest and can afford it (like getting a tax return), dump a lump of money on the principal now.
If you have no money saved, then save it first. If you have a cushion, apply a little more to the car.

DONT buy another car. Dont even drive by the dealer and look at one. Paying this one to completion will help your credit tremendously.

[Meeni]

Check what happens when you pay in advance with the loan company. Ideally, if you pay $100 more every month, your principal gets decreased by $100 everytime, and your total compound interest also get reajusted, meaning that for every dollar you put there, it reduces what you owe by more than 1 dollar. If that's the case, use all you can affort to pay extra every month. Do not overcommit yourself, just add extra to the check.

[Han445]

Word of advice, sell it and get something cheaper for the time being..

[Douche]

Originally Posted by Han445

Word of advice, sell it and get something cheaper for the time being..

So your advice is for him to sell the car, pay the bank another x thousand dollars and then look for another car?

[smallseafishie]

$870 a month is your total monthly obligation, of which is only 1/4 of what you bring home?

Create a safety net for 6 months. So keep about $6k in cash on hand. That should take about 3 months assuming you live modestly on the numbers you provided.

Then aggressively pay as much as you can towards the loan, not just a measley $80. Then once note is paid for, you'll be out of a high interest debt and you'll have better credit as it proved you're capable of paying off borrowed money.

[jss12636]

Wow, thanks everyone!
My credit score currently is 601 which is up from the low 500s before I purchased the vehicle. I have two secured cards and two other regular credit cards, though the limits are not very high. I pay these off every month if I use them. I usually don't purchase things until I can purchase them outright but to build credit, sometimes you need to use it, I hear. And I live with my parents currently and plan to do so for at least 1 more year so I can continue saving.

My total obligations are the car payment, insurance, phone, and little subscriptions here and there...totaling about $870, so I can definitely pay it off quicker. You a are right, I should definitely have more in savings and will keep contributing (and increasing) towards saving on top of what I already have. I'm waiting to see how the extra payment is applied to my loan, and might increase that more as well, all while contributing towards my 401k.

I overpaid for the car. How much? It was in perfect condition at 37,203 miles, CPO. The only package it has is the Value Package, and leather. The final actual price was $23,500. Another $1588 in GA title, tax, etc and $599 in fees. With $5k down, $20,748 was financed with $422 due monthly. I love the car. Great gas mileage and the Cpo gives me peace of mind. On top of that, I never put off maintenance so I'm hoping this will last 150k+ miles. Even after its paid off, I'll keep driving it until it dies. And if the time is right, we'll see about an upgrade, maybe.
My e46 lasted 167k and I drove that like hell. I mostly baby this, though, with the occasional spirited drives.

Shadow, I'll definitely look out for you. I tend to notice every bmw anyways. I'll honk and say hey!

Thank you for suggesting myFico forums, I will actively follow that. I know I'm gooding to pay it off early, I just have to see what time frame makes the most sense. I hope I covered everyone. You all truly are great. To the person who suggested this was not an appropriate forum... Can't find people this great somewhere else though....

[Kevinl]

Calm down Pre 2008 7.9 % rate would be about 1% above prime. I am actually surprised the rate is that low with a 601 credit score

If you try to trade or sell the car you will lose more money than you end up paying in interest

I would try to pay it off sooner if you can but don't kill yourself trying to do it

[bloppitybloop]

Originally Posted by jaysahni2012

Wow, thanks everyone!
My credit score currently is 601 which is up from the low 500s before I purchased the vehicle. I have two secured cards and two other regular credit cards, though the limits are not very high. I pay these off every month if I use them. I usually don't purchase things until I can purchase them outright but to build credit, sometimes you need to use it, I hear. And I live with my parents currently and plan to do so for at least 1 more year so I can continue saving.

My total obligations are the car payment, insurance, phone, and little subscriptions here and there...totaling about $870, so I can definitely pay it off quicker. You a are right, I should definitely have more in savings and will keep contributing (and increasing) towards saving on top of what I already have. I'm waiting to see how the extra payment is applied to my loan, and might increase that more as well, all while contributing towards my 401k.

I overpaid for the car. How much? It was in perfect condition at 37,203 miles, CPO. The only package it has is the Value Package, and leather. The final actual price was $23,500. Another $1588 in GA title, tax, etc and $599 in fees. With $5k down, $20,748 was financed with $422 due monthly. I love the car. Great gas mileage and the Cpo gives me peace of mind. On top of that, I never put off maintenance so I'm hoping this will last 150k+ miles. Even after its paid off, I'll keep driving it until it dies. And if the time is right, we'll see about an upgrade, maybe.
My e46 lasted 167k and I drove that like hell. I mostly baby this, though, with the occasional spirited drives.

Shadow, I'll definitely look out for you. I tend to notice every bmw anyways. I'll honk and say hey!

Thank you for suggesting myFico forums, I will actively follow that. I know I'm gooding to pay it off early, I just have to see what time frame makes the most sense. I hope I covered everyone. You all truly are great. To the person who suggested this was not an appropriate forum... Can't find people this great somewhere else though....

Well, if you're just starting to build credit, it sounds like you're doing alright. If you keep paying on time and keep your utilization % low on your credit cards, you should see your credit score go up fairly quickly which will allow you to refinance and get a better rate. Good luck!

[markus037]

if your credit sucks then you should be happy you even got approved.

my credit was horrible a few years ago, i had an eviction on my credit report and an account in collections. i was pretty much denied before i even applied for a credit card or any sort of loan.

One day a black e36 M3 popped up for sale at a chevy dealer for a good price so i decided to give it a whirl. I filled out a credit report and the finance manager called me the following day telling me I got approved but at 13%. I bought the car anyway and used this to improve my credit score. after 3 years of not missing a payment, my creidt score went up dramatically. i just closed on my house january 9th and this all happened in 8 years.

my advice is to just keep paying what you can and your credit will go up. keep the car for now and dont sell unless you really have to and try and get ahead of the loan.