I was going to comment this to mobygjy, but then decided to butt out...but since AppleCello asked again...

One other problem with the long loan term to get low payments scenario is that you must realize that you are paying more interest than principal earlier in the loan. While your payment amount may stay consistent over the term, the percent of that payment that goes to interest is much higher in the early part of the loan than it is later in the loan. Put simply, the bank gets its money first. What this means is that if you "refinance" early into a long term loan you will end up having to refinance a larger amount of the principal than you would if you were refinancing a shorter term loan. This COULD put you in a tricky position...and that is one of trying to get a used car loan (which is what your refinance will likely be) for more than a bank will lend. Depending on MINI residual values (which admittedly seem to be staying high) you might end up trying to borrow more than the car is worth, and that obviously will be a problem in getting the loan. Remember, cars - unlike houses - ALWAYS decline in value in the short term. Banks like to refinance houses 'cause they're always getting an asset that is worth more than the amount financed. Not so with cars.

For what it's worth, my advice to anyone who is struggling come up with sufficient cash to make a car payment is to buy a cheaper car. Passions aside (and I know that this is rough), there is no sense in leveraging your future financial success against a declining value asset. Put another way, if you can't afford it now, then don't buy it. If your future turns out well...then you'll have money to buy what you want at that time. In the meantime, don't get hooked up with a deal that you may not be able to handle should things not turn out so well in the future.

Good luck!

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Bring Out the Scoops!

 

good point. thanks for educatin' us young folk on some of the finer financial points. In that case, that just means less spending money for me. Or more hours working!

 

Yeah, what jsun said! He made a great and often overlooked point on financing and refinancing your used car.

 

Refinancing would be a bad idea. Rates are typically higher for used car loans. What you could do is pay more then the minimum payment. Any extra would apply to the principal of the loan. The result would be paying the car off sooner then the term of the loan. Make sure there are no prepayment penalties.