CarMax recently changed their financing policies with regard to how they handle overpayment. My contract with them says overpayment will be applied to the principle balance, and their new policy (which does not appear on my contract) read the following;
They are handling my money differently than how my contract says they should handle it, and it pisses me off. What can I do about it WITHOUT HIRING AN ATTORNEY?
Start by writing them a letter, pointing out that you have a contract.
Do not email this! Snail mail. And send it as a registered mail letter, which has to be signed for. Keep the Post Office return card. Keep copies of your letter. Document everything. And be polite.
One polite letter may solve this. Or not.
You can refinance it elsewhere. I’ve done that. Basically, I got a good deal from the dealer for signing up for the financing, then I turned around and re-financed with my credit union.
That might be difficult to do, since the car has depreciated in value. Do banks refinance property in which you owe more than the property is worth? Otherwise I think I’ll do this.
If you don’t get any really good answers here, or if you want to publicize this change of policy further, you might try telling your story to the folks at The Consumerist. They often deal with things like changing terms and conditions of loans and credit cards, and have plenty of good advice to offer.
I read the title as Carl Marx was screwing him over (and yeah I know it is “Karl”).
Just had to share. 
It’s POSSIBLE they aren’t screwing you. Your payments do still reduce your principle. Every payment you make does. It sounds like they are just applying that money to satisfy your requirement to make a payment every month. Under your old system, if you pay extra, you are still required to make a payment the next month. Under the new system, you are not.
Now if they do not apply the money to your account until their ‘due date’, and are charging you interest on it, then they are screwing you.
Since they make a specific distinction between a scheduled payment and a payment going entirely toward principle it sounds like they are handling the 4 advance payments prior to the principle only payment like regular iterated payments and are still charging full loan interest on those payments.
I wonder what they would do if (for example) someone had a windfall and came in with the entire remaining principle payoff amount. would they insist on collecting 4 months of advance interest in addition to the principle payoff?
**Mosier ** --have you contacted them about this?
There might be some “mice type”* allowing them to alter the terms of the initial contract.
*courtesy of Clark Howard
Nitpick: in this context it’s “principal,” not “principle.”
No, they probably won’t, but depending on the car’s value, and whether you’ve got a bit of spare cash to pay down the loan if needed, you might be able to work it out. We’ve done this when we had dealer financing that was usurious; I also recently refinanced our car loan which was already through the credit union (the new loan was treated as a “used car” loan, but the rate was still lower than when we bought the car initially.
Check the paperwork and make sure you won’t have a prepayment penalty. GMAC used to have that (per something a colleague told me).
Depending on how they calculate the interest (based on actual outstanding balance, vs. a scheduled interest amount that ignores any prepayments), you might be OK in the long run with the current loan. If you pay a few bucks extra every month, soon enough you’ll get 3 months ahead and then additional payments will reduce the principal. But I’d still get away from Carmax as soon as you can if they’re pulling crap like this.
Mosier–where do you stand?
It sounds to me like they only want you to get so far ahead on your payments. I would interpret it that the extra money does reduces your principal and counts towards future payments, but that they don’t want you to get more than three months ahead, so any money more than that just goes to principal and not to counting as a fourth months payment.
It sounds to me like they’ve had problems with people getting ahead, not paying for months, and then forgetting they still have the loan. 
Or with people forgetting that even if they’ve paid ahead, interest does continue to accumulate on the remaining principal. If you’ve paid three months ahead, and then don’t pay for three months, by the time you pay again you’ve really saved very little on interest due.
Regardless, definitely contact them and straighten out how they interpret it.