Me and the wife recently purchased a new car, but because of our bad credit history we were stuck with a 17.9% APR and $450/mo. payments for the next 5 years…adds up to paying over $29,000 for a $17,000 car. No problem, we were assured that if we made a large payment later it would go off the principal, and 60% of the payments we made until then went towards the principal. I get a $17,000 check in June because my company was bought out and I had stock options, so I figured I’d pay it off then.
My wife was looking into the possibility of paying it off partially, so we could make a years worth of payments on it and improve our credit rating. She called the bank that financed it to see what size payment we would have to make to do this, get some ideas on what they payments might be reduced to, etc. She was told there was no way they could give them any information like that, the payment would have to be made first and then they could refer to their amortization tables to tell how many payments would be left. She was also told the payments would not be reduced, and if we payed $10,000 and reduced the principal to $5000 or so, the interest would not be reduced, we would continue to pay 40% of the payment towards interest until the principal was reduced to 0, which could take a couple of years.
This makes me kinda suspicious, especially the part about them not being able to tell you anything until after we had made the large payment. Is there anyone with financial training, experience with car finance, or just personal anecdotes who might be able to help me figure out what to do? I’m strongly tempted to say ‘screw improving my credit’ and pay off the whole principal in June, but my wife is against that. My second choice would be to pay all but $1350 of the principal, which SUPPOSEDLY would be paid off in my next 5 payments if that 60% figure is right, which would have us making exactly 12 payments on it and pay the car off…any advice?