So I stupidly purchased a new car...

[Beren]

Edmunds pricing for a 2006 Prius with the same options comes out at:

$22,060    $23,880    $25,778

The private party selling price being the middle one, which is within a couple hundred of KBB.  Edmonds doesn't have a listing for 2007 used cars that I can find yet.

Lots of great advice and insight concerning how loans work.  I'm going to pull out the loan agreement I signed and recheck it.  I did specifically ask if their were any penalties for early payoff and was told there were not any such penalties.  I didn't see any when I signed, either, or I wouldn't have signed.  It's always possible I missed something.

[Matthew Carberry]

There are a couple of ways of reducing the amount of interest that you pay...

1. Pay half of your monthly payment on the first of the month, pay half on the 15th.

2. Pay your standard monthly payment, and add money above and beyond that. All of the "over payment" will be credited towards principle.

Just make sure that you read the fine print on your loan documents to make sure that you won't incur a penalty for doing either of the above. If there is that kind of fine print, I'd advise not taking the loan.

#2 will work but #1 will not on a compound interest (standard amo) mortgage loan.

The interest is calculated monthly, not daily, and is paid in arrears (April 1st payment pays the principle and interest due for the month of March).   Option 1 only works with a simple interest loan where the amount of interest due is recalculated daily and you are charged interest in advance.  Fannie, Freddie, Ginnie Mae, Countrywide and Wells Fargo  (the Pentaverate  ) don't set up mortgages that way.

You are free to pay in two halves (but not late) but unless your total payment for any month is greater than the total principle and interest due in that month your loan will not be shortened. 

The only way to shorten the loan is to pay more total principle each month or year (Option 2) than is due.

[Matthew Carberry]

Beren,

Have you thought about transferring that non-deductible car loan interest to a nice, deductible interest, perfectly safe, variable rate with prepayment penalty, 10 year balloon and hidden fees Home Equity Line of Credit?

    

[Beren]

Don't tease me Carebear, I've been known to make poor financial decisions.   

[Matthew Carberry]

Curses, foiled again! 

[Sergeant Bob]

Beren,

Have you thought about transferring that non-deductible car loan interest to a nice, deductible interest, perfectly safe, variable rate with prepayment penalty, 10 year balloon and hidden fees Home Equity Line of Credit?

    

Thats funny! But then, who decided I was the judge of whats funny and whats not?

[K Frame]

"#2 will work but #1 will not on a compound interest (standard amo) mortgage loan."

I wasn't talking about mortgage loans in that particular message -- auto loans or other signature-type loans specifically.

[MechAg94]

My GMC truck is almost paid off.  I think I'll keep it.  I don't commute very far these days and the gas savings doesn't justify another vehicle. 

[Matthew Carberry]

"#2 will work but #1 will not on a compound interest (standard amo) mortgage loan."

I wasn't talking about mortgage loans in that particular message -- auto loans or other signature-type loans specifically.

Oh, gotcha.  I didn't mean to imply you wuz ignint Mike, sorry bout that.   

There are a couple ways people think they can pay off mortgages faster that just don't work, I wanted to make sure that was clear. 

I think that is one way people get tricked on loans, being misled by the lender (or some "buy my book" guy) on how easy it will be to pay them off with "secret methods".

[Calumus]

The best thing to do is look at your monthly bill. Somewhere on there there will be a pay off.  This will be the amount you owe if you pay the car off today. That's only good for the day the bill was issued. Call who ever you got your loan through and ask them for your pay-off and your per-diem. That's the amount of interest you accrue every day. Simply, if you owe $10,000 today and your per diem is $1.50 tomorrow you'll owe $10,001.50 and so on. Depending on what state you are in, it can be illegal to charge interest up front on a car loan. If you pay the loan off now, you won't have to pay interest on all the years you didn't have money loaned to you. I know Its against the law in Jersey (I sold cars here for 2 years) and I'm 99% sure this is the case in NY and Pa. There are a couple of other factors to think of. Prius's are the "hot" hippie car right now and dealers are still charging a premium for them. That helps you from a negotiating stand point. You also can't get a car loan for used cars under $10,000 in most places, and almost no banks will give you a loan on a car with over 85k miles. So even though that civic or accord still has another 100k in it, you'll have to get a personal loan, use your home equity, or pay cash. If you need good fuel mileage try to find a diesel VW preferably with a manual trans. A buddy of mine had a diesel Jetta with a 5 speed and averaged about 60mpg on the highway and he drove like an absolute idiot, as in 110mph plus any time he was on the highway. As for in-expensive new cars look at the new mitsubishi lancer. Phenominal cars with a 100k warrenty, and I hate to do it but I really have to recommend that you do some research before buying a hyundai/kia. They were among the brands I sold and the number of horror stories I could share would take up more of my time then I'm willing to spend typing. Suffice it to say that at the dealership the common consensus as to the reason why kias get good gas mileage was that they spent most of their time on flatbeds. Food for thought,
Shawn

[roo_ster]

I think that what jfruser was saying was some auto lenders were calculating that if you borrowed $20k for a car at 8% that the total of the interest would be $4330.  They would then credit your payments against that $4330 until it was entirely paid, and then they'd start to apply the payments to the $20k principal.  Essentially it can be thought of as a pre-payment penalty that doesn't allow you to avoid any interest by paying off the loan early (whether by making extra payments or by selling the car). 

All the more reason to not go into debt to buy a car in the first place.

That what I meant.  I have no idea about its current legality, just the horror stories my dad would tell me about the schlubs who financed autos back in the 1960s & 1970s.  My dad has always been a cash man.

I was talked into financing $8K of a $20K car for three years...2 years, 10 months ago.  In two months, I will again be car-payment free...free at last, thank God Almighty, free at last!

I hated having any other debt than the mortgage.  No matter how SWMBO squeals in the future, it is used cars bought with cash from now until:
1. We own a viable business and can write off a new/leased auto
or
2. We are wealthy enough to buy a new auto with cash