MBFS "min finance charge"

[youngandcreditwrthy]

so I bought a brand new MB about 7 months ago. got their lowest rate at the time which they told me was 6.9% ish. (the highest Ive ever paid for an auto loan in the past ten years TBH)

told I could refi and verbally told there were no pre payment penalties. I did good in the Finance manager's office to deny everything except PPM (pre paid maintenance) which I figured was good cause of inflation. been good so far, my local MB dealer is super nice and talks to me off the record with helpful tips.

so I am a part of a sag union indirectly and they're offering like 5.7% interest for auto loans, and I've already paid down the loan from 65k to 43k.

the min finance charge is $75 per payment. but verbally they said no pre payment penalty. is a min fin charge a pre payment penalty?

so like if I refied the loan with the CU for 5.7%, would I have to also pay off a 75$ per payment min finance charge to refi the loan?

I'm super confused by it. OR would i just have to refinance and pay the "pay off quote" which is 43k and some change.

Ive never had an auto loan with a min fin charge or even a pre pmt penalty. BMWFS was so much bettter than MBFS. ugh

is it even worth it to try and refinance with just a 1% diff interest rate? I mean, I dont want a new account on my credit, I have good credit, but barely and Im trying to really focus on rebuilding. I let many accounts get closed and kinda ignored my credit after paying off 150k in cc debt. I just used mostly cash for about 4 years until the past 9-12 months. I kinda got a specialty mercedes that had no financing specials and was rare to even find in the color I got it in, so my rate could not have been lower with MBFS and their rate beat the other offers I had at that time.

thanks for any tips.

[pizzadude]

Do you have your loan agreeement documentation that you signed ?  That would explain what exactly the minimum finance charge is, and also would call out if there's any penatly for pre-payment.

It is farily uncommon to have a penatly for paying off your loan early with auto loans, but I also don't really understand a minimum finance charge either.   Towards the end of your loan most of your payment would go to principle, but they're saying you'll still have to pay $75 minimum in interest each month?  If this is true then I would for sure look to refinance, as you'd likely be saving thousands of dollars in interest payments.

[Brian_Earl_Spilner]

You'll have to look at how your payments are structured to figure out any savings. You can get a rough idea online using auto loan calculators.

As mentioned earlier, the interest is typically front loaded on an auto loan, so the next question would be, how did you apply the excess? Did you simply pay extra and it applied to future payments? Did you specifically ask for excess to be applied to principle? That will affect calculations.

For payoff, you would asked mbfs for the payoff quote. The number they give you will be all inclusive of principle, fees, interest, and to allow time for the payment to reach them if mailed, typically 10-14 days. They should be able to break that down for you when you call. If the payment arrives quickly, they'll refund the difference in time. 

[CreditCuriosity]

I refinanced a MBFS loan 2 years ago before 1st payment was even due as the rate was outrageous 6.99(800+ fico) which was best tier they offered at the time and likely still the best they offer if not higher.  No personalities.  About to do the same for BofA loan at 6.99 as had to use finance lender lender so finance person could get his point or whatever as part of deal(porsche dealer) and that rate isnt the best I can get so will goto NFCU again or BCU and refinance with them.  So no penalty to answer your question.  

This is what I hate buying cars so badly as have to line the pockets of finance manager.  Using their financing usually and leather care and paint protection.  Will be cancelling all those and getting most of my money back and refinancing as well..  I dread car shopping as nothing is pleasant about it.  Like the cars, but always feel dirty after the deal

[Kforce]

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@pizzadude wrote:

Do you have your loan agreement documentation that you signed ?  That would explain what exactly the minimum finance charge is, and also would call out if there's any penalty for pre-payment.

^^^^^  Agree, you should check your loan doc's, it is all in there.

It is farily uncommon to have a penalty for paying off your loan early with auto loans, but I also don't really understand a minimum finance charge either.   Towards the end of your loan most of your payment would go to principle, but they're saying you'll still have to pay $75 minimum in interest each month?  If this is true then I would for sure look to refinance, as you'd likely be saving thousands of dollars in interest payments.

---

Even if no penalty for paying off your loan early.

If a $75 minimum charge for interest exist,

you would need to pay off or re-finance before your balance goes lower than ~$13,000

No pre pay penalty, however a pay full-term penalty    

As @Brian_Earl_Spilner  said  "You can asked "MBFS" for a payoff quote".

[youngandcreditwrthy]

@pizzadude  the way its structured is theres still a little interest in most of the payments even the last ones I think.. maybe not the last year, but technically if I refi, Id be wanting to avoid that whole min 75 a month finance charge.

there is no pre payment penalty, but I know how tricky these finance companies and "shadow" banks get with their financing. MBFS is not a de facto bank as Im sure youre all aware.

@Kforce yeah my rate is 7.49 because the finance manager just HAD to mark up the buy rate, and I didn't complain.

They BEGGED me to buy the 6000 extended warranty and I keep a car on average like two years.. more like 18 months just because I'm that kind of person. Its my splurge. I save money by using my lemon trees and brushing teeth with baking soda! haha

EDIT: I did NOT buy the extended warranty and actually asked to read every single contract associated with their scam protections LOL which only would have wasted MY TIME not theirs so of course they were happy to let me.

i did but the PPM and kept it. bought gap but canceled bc I put 10% down and paid down the loan enough after a couple months.

[youngandcreditwrthy]

@CreditCuriosity  yeah I LOVE cars.. I hate the maintenance and ll that stuff, but I LOVE detailing.. although Im OCD.. and stealerships always make me feel dirty because I have to tell them no so many times. 

I will say I do like that MBFS offers pre paid maintenace because that is useful esp in this environment.

There was a time about 10 years ago when BMW had the best 4 year 50k mile oil change, all major services covered. I remember even getting  5k brake job included and Santa Monica BMW (good stealership)

btw I dont buy cars in my local area beverly hills benz. although they are very customer service oriented and nice, they don't negotiate at all lol so I went to Ontario and MB Ontario WAS AMAZING!

@Brian_Earl_Spilner @pizzadude @Kforce  cant remember who said what as Im typing but that is GOOD TO KNOW.. that the payoff (which I check frequently haha) INCLUDES everything.

See.. what Im scared of is lets say I refi to save 2% max on the interest rate over 72 months but THEN I have to include a MINIMUM 75 fee for the remaining 62 months (I think) left on my current loan...75x62 is 4650.. lmao if I HAVE to include that to refi and then that get capitalized.. that'll make my loan higher than the original lol. originally it was 66k and I already paid it down to 43k in less than 8 months not including downpayment. (my numbers are rough forgive me) but starting out with a new loan at 50k LOL capitalizing that min finance charge would be just so doggone terrible. 

I had never even heard of a min finance charge on any other auto loan than a credit card (like target has a min 1 charge) and most sync bank cards have a min finance charge of 1-2. some have a min fin charge of .50 LOL) 

I should call mercedes FS and just ask, but ofc Im scared of the lack of intellect. heh Thanks yall!!

[youngandcreditwrthy]

sorry @Kforce yes i do have the dox. Ive read through the contract a dozen or so times. it is NOT clear at all. there are no paragraphs, sections related to refinancing that I recall whatsoever.

[Brian_Earl_Spilner]

I simply skimmed before responding so if I missed something, I apologize, but I don't understand why it's such a pain point.

As mentioned earlier, interest is front loaded. At the start of the loan your 700 payment will have 100 going to principle and 600 to interest. Near the end of the loan it will be flipped with 600 going to principle and 100 going to interest. A minimum finance charge won't even be a concern until you are so close to payoff that the amount going to interest is lower than the minimum charge. You still owe 43k so it's a non-issue. 

In order to know when you will cross that point when it matters you need to look at the amortization schedule. If they can't provide you that, or can't tell you when that will happen, you can use a calculator online to get a rough idea. 

[Kforce]

.
Loan :	43000.000
Rate :	6.900 %
Pmt :	1200.000
.
.
Payment	T-Pmt	Princ	T-Princ	Int	T-Int	Balance	Pmt #
.
1200.00	1200.00	952.75	952.75	247.25	247.25	42047.25	1
1200.00	2400.00	958.23	1910.98	241.77	489.02	41089.02	2
1200.00	3600.00	963.74	2874.72	236.26	725.28	40125.28	3
1200.00	4800.00	969.28	3844.00	230.72	956.00	39156.00	4
1200.00	6000.00	974.85	4818.85	225.15	1181.15	38181.15	5
1200.00	7200.00	980.46	5799.31	219.54	1400.69	37200.69	6
1200.00	8400.00	986.10	6785.41	213.90	1614.59	36214.59	7
1200.00	9600.00	991.77	7777.18	208.23	1822.82	35222.82	8
1200.00	10800.00	997.47	8774.65	202.53	2025.35	34225.35	9
1200.00	12000.00	1003.20	9777.85	196.80	2222.15	33222.15	10
1200.00	13200.00	1008.97	10786.82	191.03	2413.18	32213.18	11
1200.00	14400.00	1014.77	11801.59	185.23	2598.41	31198.41	12
.
1200.00	15600.00	1020.61	12822.20	179.39	2777.80	30177.80	13
1200.00	16800.00	1026.48	13848.68	173.52	2951.32	29151.32	14
1200.00	18000.00	1032.38	14881.06	167.62	3118.94	28118.94	15
1200.00	19200.00	1038.32	15919.38	161.68	3280.62	27080.62	16
1200.00	20400.00	1044.29	16963.67	155.71	3436.33	26036.33	17
1200.00	21600.00	1050.29	18013.96	149.71	3586.04	24986.04	18
1200.00	22800.00	1056.33	19070.29	143.67	3729.71	23929.71	19
1200.00	24000.00	1062.40	20132.69	137.60	3867.31	22867.31	20
1200.00	25200.00	1068.51	21201.20	131.49	3998.80	21798.80	21
1200.00	26400.00	1074.66	22275.86	125.34	4124.14	20724.14	22
1200.00	27600.00	1080.84	23356.70	119.16	4243.30	19643.30	23
1200.00	28800.00	1087.05	24443.75	112.95	4356.25	18556.25	24
.
1200.00	30000.00	1093.30	25537.05	106.70	4462.95	17462.95	25
1200.00	31200.00	1099.59	26636.64	100.41	4563.36	16363.36	26
1200.00	32400.00	1105.91	27742.55	94.09	4657.45	15257.45	27
1200.00	33600.00	1112.27	28854.82	87.73	4745.18	14145.18	28
1200.00	34800.00	1118.67	29973.49	81.33	4826.51	13026.51	29
1200.00	36000.00	1125.10	31098.59	74.90	4901.41	11901.41	30
1200.00	37200.00	1131.57	32230.16	68.43	4969.84	10769.84	31
1200.00	38400.00	1138.07	33368.23	61.93	5031.77	9631.77	32
1200.00	39600.00	1144.62	34512.85	55.38	5087.15	8487.15	33
1200.00	40800.00	1151.20	35664.05	48.80	5135.95	7335.95	34
1200.00	42000.00	1157.82	36821.87	42.18	5178.13	6178.13	35
1200.00	43200.00	1164.48	37986.35	35.52	5213.65	5013.65	36
.
1200.00	44400.00	1171.17	39157.52	28.83	5242.48	3842.48	37
1200.00	45600.00	1177.91	40335.43	22.09	5264.57	2664.57	38
1200.00	46800.00	1184.68	41520.11	15.32	5279.89	1479.89	39
1200.00	48000.00	1191.49	42711.60	8.51	5288.40	288.40	40
290.06	48290.06	288.40	43000.00	1.66	5290.06	0.00	41
.

Interest portion of payments are calculated from interest rate &

balance.  If APR is 6.9% interest payment will fall less

than $75 at $13,043 balance.

With an estimated monthly payment (just a guess).

About 12 months before payoff one would hit the $13,000 balance.

Depending on if the MFC is a separate fee or just the minimum interest charge,

you would get two different numbers

Normal loan interest of approx  ~$5,290

As minimum MFC = month 29's  t-int balance + (75*12) = (4,827+(75*12)) = 5,727

 Extra $437 / fee

*

If it is an extra $75 per payment on top of regular interest it would be

(75*12)+5,290 = 6,190

 Extra $900 / fee

Not nice but not thousands