Thought I'd put some #'s to it!
Lets say someone has a 5 year loan on a new vehicle where they're 2 years into it. They originally borrowed $21,000 @ 9.9%, over a 5 year term. Payment would be roughly $445/mo. If they have made all payments on time, they'd still owe about $13,800 after 2 years. The total of those payments (3 more years @ $445) would be a little more than $16000.
Since new vehicles depreciate, it would not be unusual if that 2 year old vehicle is now worth only about $7500. A redemption loan would cover a little extra (loan fees & attorneys fee to handle the redemption process) and though I don't know exactly how much, I think its safe to assume $1000 or less. A redemption loan on $8500 at 25.99% APR over 4 years would be a payment of about $287. If paid over 4 years, would be about $13750.
For someone w/ a tight income, it might be easier on them to have a lower car payment. ($150+ per month in this example.) Even if w/ paying the high interest, they save more than $2000. If they're able to afford the $445/mo payment, it would take 25 months to pay off the redemption loan, saving them 11 payments or almost $5000.
Lets say someone has a 5 year loan on a new vehicle where they're 2 years into it. They originally borrowed $21,000 @ 9.9%, over a 5 year term. Payment would be roughly $445/mo. If they have made all payments on time, they'd still owe about $13,800 after 2 years. The total of those payments (3 more years @ $445) would be a little more than $16000.
Since new vehicles depreciate, it would not be unusual if that 2 year old vehicle is now worth only about $7500. A redemption loan would cover a little extra (loan fees & attorneys fee to handle the redemption process) and though I don't know exactly how much, I think its safe to assume $1000 or less. A redemption loan on $8500 at 25.99% APR over 4 years would be a payment of about $287. If paid over 4 years, would be about $13750.
For someone w/ a tight income, it might be easier on them to have a lower car payment. ($150+ per month in this example.) Even if w/ paying the high interest, they save more than $2000. If they're able to afford the $445/mo payment, it would take 25 months to pay off the redemption loan, saving them 11 payments or almost $5000.