On this episode of Your Money Playbook the coaches dive into car loans. From making extra payments that actually count to avoiding common financing pitfalls, Coach Jenny shares practical tips that can save you money and shave months (or even years) off your loan. Whether you’re newly financed or halfway to the finish line, this episode will help you take control of your car payments and drive closer to debt-free living.

 

0:00:04.9 Lynne Jarman-Johnson: It’s time for your Money Playbook. And today we have a great topic. Everybody has planes, trains and automobiles, right, Jenny?

0:00:14.1 Jenny: That’s right. They sure do.

0:00:15.5 LJJ: We are on location in Marshall with our coach Jenny, who happens to be our Marshall manager. And I’ll tell you what, we’ve got a great topic. It really is about cars and auto lending. We had a caller call in. Let’s hear from Sean.

0:00:29.1 Sean [CALLER]: Hey, this is Sean. So, here’s my situation. I’ve had my car loan since college, and I’ve basically just been paying the monthly bill because I thought that’s all I could do. But I just got a better-paying job, so now I’m wondering … Can I pay extra on that loan? And if I can, how much would even make sense to do? I also thought about instead just getting a new car, but if I did that, should I wait to pay this one off first, or just try to trade it in? I feel like I might be missing something here, though. So, I was wondering what you guys would recommend. Thanks in advance.

0:00:58.2 LJJ: Well, those are great questions all around, and congratulations, Sean. Number one, that you are striving to make sure that you’re making your payments on time. But now you’re thinking, “Hey, maybe I should pay a little bit more.” We’re going to get into that in a minute. I’m going to ask Coach Scott what he thinks.

0:01:14.4 Coach Scott: So you want to pay off your car loan fast? How fast? I’ll give you three different speeds: pedal to the metal, simple speed up or just tap the accelerator. The most drastic, the pedal to the metal plan, is this: sell your current vehicle and buy one with a smaller payment or none at all. Having a shiny new ride is great, but is it really necessary to get from point A to point B? If you’re struggling financially, slashing or eliminating that big monthly payment could help you better balance your budget and sleep at night. Want to keep your vehicle? Then try the simple speed up. If you get paid every two weeks, pay off half your monthly payment with every check. On an 84-month loan, you’ll pay it off seven months faster. If you just want to tap the accelerator a little, you could assess your spending and cut out a few things. Pack a lunch instead of buying one every day. Make your coffee at home instead of getting those big-ticket double mocha lattes. It might add up to 50 or more dollars a month … Money that can be used to chip away at that vehicle loan. No matter how quickly you want to pay down or off your car loan, it’s great that you’re steering in the right direction. Every little bit helps. Want to learn more? Let us know. Consumers, we’re your team to count on.

0:02:32.6 LJJ: So Coach Scott just gave us some great tips on making sure that we’re ready for that car and also paying it off and paying it down. But let’s dig a little bit deeper. We get ourselves a car, and a lot of times, I did this when I was young, I purchased a car that was way over what I should have spent, but I was so excited and I loved it so much. And that’s where emotion comes in, right? Let’s talk a little bit about what we should think about when purchasing a car, but then also … Yeah, can we pay it off faster? Are there rules against it?

0:03:05.2 Jenny: Yeah. So those are all great things to talk about. Making sure that when you are looking for a new vehicle, if you do need one, then you are finding something that’s really within your budget. You don’t really want to overextend yourself or cut yourself short on any of the other bills that you have to pay. And to save you a few bucks at the end of the loan, you can always pay extra on the principal and pay it off sooner.

0:03:28.5 LJJ: And that’s really what we’re talking about, right? Looking at how we can all kind of take a look at the budget as a whole and see what the needs for a car are. If you have a big family, it’s a very different need than if you’re just heading to work every day by yourself.

0:03:44.6 Jenny: Yes, 100%. Assessing all of those things when you’re in the market for a new vehicle is really making sure the needs for your family. It would be easier to have a minivan or something with more seating, the convenience to cart your family all around. But …

0:03:59.0 LJJ: Explain the difference between paying extra to the principal … But that’s really not your payment.

0:04:05.4 Jenny: You’re right. That is really not your monthly payment. Your monthly payment is calculated with principal and interest … Right into that one monthly payment. Whereas if you are paying extra towards the principal, you’re really just dropping the balance of your loan. So therefore, you owe that much less each month, and it’s not accruing as much interest as if you were to pay each payment every month on time for the whole duration of your loan.

0:04:31.2 LJJ: Yeah. And a lot of people will do a set it and forget it, right? It’s set up in Online Banking, you’ve got your auto payment. Scott mentioned the every, if you get paid every other week and that’s where you’re talking about the principal.

0:04:43.0 Jenny: Yep. Great tips that Scott had gave: making your breakfast at home, making your coffee at home, bringing your lunch. Those are some extra ways, too, that you can budget within those every-other-week paychecks to set aside really half of your monthly payment, and then anything extra that you can save to maybe add to that loan note as well.

0:05:01.9 LJJ: It was really interesting. We talked about … Look at if all of a sudden, you realize this car isn’t for you, then let’s sell it and let’s get you into a car that is.

0:05:10.7 Jenny: Absolutely. Yep. If you find yourself struggling to make those monthly payments, or maybe you had something change in your life, that yes, it may be time to sell that vehicle and look for something that’s more within your budget a refinance or a new purchase that you can get a lower monthly payment so you’re not stretched beyond your means.

0:05:30.2 LJJ: Sean had a great question, and the question talks about, he’s got a car, he has another car he wants to buy, he’s trying to figure out how to do that. And it really does depend on if it’s at a dealership or it’s a private party, right?

0:05:41.5 Jenny: Yes, of course. Yep. Dealerships, there are some options. You can work with that dealership to either do a trade-in, see what they’ll give you for that vehicle, and build that right into your new sale agreement at that dealership. That would ensure the loan gets paid off with Consumers Credit Union in conjunction of getting that new vehicle that you want to be in. Private party sale, I usually recommend just come in and have a conversation with us. We can coach you through that, give you some best practice options of how to work with your buyer. You may not be familiar with them. Some best practices of how to get that loan note paid off first, so then you can sell that vehicle and get the new one from wherever you happen to be getting it from.

0:06:21.8 LJJ: And make it as smooth as possible.

0:06:23.2 Jenny: And make it as smooth as possible. That’s right.

0:06:32.7 LJJ: If somebody wants to purchase a car for the very first time, what do you suggest?

0:06:36.4 Jenny: I would recommend talking to one of our employees here at Consumers Credit Union. We can help guide you, talk to you with some financial education, have a great in-depth, meaningful conversation about what does your budget look like. And then we can set you up with either helping take an application right here in the office or with one of our partner dealerships to make it an easy, seamless transition to get that new vehicle.

0:06:58.8 LJJ: Well, coach, you have been awesome. And now it’s time for your three tips, because we love to give those Money Playbook tips at the end here. Tell us about how we can make sure we get that car and are happy.

0:07:09.5 Jenny: Of course. So number one, make sure it’s within your budget. Don’t go on impulse and really make sure it’s something that you truly need for your new vehicle. Two, save a few extra bucks each time. Add that to the principal if you’re able to. And third, let’s take Scott’s tip and make sure each of those paychecks you get every other week, that you save a little bit out of those to make sure you can make your monthly payment on time.

0:07:33.6 LJJ: I love those tips. It’s people like Sean who called in with this question. Great question, Sean. Thank you so much. If you’ve got a question that you’d like to ask us, call into our Playbook hotline: 269-213-3360. 269-213-3360. It is our Money Playbook, and it’s yours too. Thanks for joining Consumers Credit Union.