Blogger Grayson Bell discusses how much you can save on your car loan with RelayRides and provides a great Bankrate calculator to determine your exact savings.
Auto loans are a common form of debt these days. Financing both new and used vehicles has been popular for some time, but lately, that popularity has increased. With interest rates low, people with great credit can finance a vehicle for less than 2% APR. No matter the interest rate, people are still paying for their cars on a monthly basis. These monthly payments can be one of the bigger expenses in a household budget.
The Auto Loan Breakdown
The Federal Reserve publishes data released by the car financing companies about national averages of auto financing. Armed with this information, we can provide a breakdown of how much people are paying to finance their vehicle.
Since buying a new car is typically a bad investment, we are going to focus on used vehicles and their corresponding financing arrangements. The average used car financing amount is $18,723. That is compared to the average of $26,673 for a new car.
How many months do you think the average loan term is? 24, 36, 48 months? While these can be common terms for used cars, the average loan term is actually 64.5 months. Yes, people are financing their cars for a little over 5 years.
One of the most talked about financial aspects of any car loan is the interest rate. People focus on that little number more and more. While interest rates have been falling over the years, the average used auto loan interest rate is 7.73%. This takes into account people with great credit and those with bad credit.
With all of these aspects of a used auto loan, a person can expect to pay an average of $357.91 per month for 64.5 months. That brings the overall cost of a $18,723 car to $22,906 with a person paying $4,183 in interest payments alone. You can use this calculator to put in your own loan information. While these numbers can be scary, there are ways to reduce the overall burden of car loans. The best way is to pay extra on your loan.
Making and Paying More
There are numerous ways to make more money out there, but most require a lot of work. We all have a desire to make more money, but the time commitment can be overwhelming. One simple and effective way to make more money per month is to share your car.
RelayRides is a car sharing marketplace that connects people willing to rent their car with people wanting to rent a car. This type of car renting has become very popular over the years. The best part is that you can earn money if you rent your car.
If you have a car that you are not using all of the time, then you should think about renting it out. You may live in a city with great public transportation or live in close proximity to work. This provides a great opportunity to rent out your car to someone who needs a rental.
The average member of RelayRides makes $250 per month renting out their car. While this may not sound like a life changing amount, it actually might be. I am going to break down the math on how you can take the extra $250 a month and put it toward your auto loan. The results may surprise you.
Here Comes the Math
One thing I love about math and numbers is that they can be eye opening. You can easily put together a few numbers and see what the future may hold. That being said, lets see how fast you can pay off an auto loan if you put the extra money you make from RelayRides toward the loan. Here are the averages again.
- Loan Amount: $18,723
- Loan Maturity: 64.5 months
- Interest Rate: 7.73%
- Monthly Payment: $357.91
- Average made from RelayRides: $250
As I indicated before, if you pay the regular monthly payment, then you will be paying on your auto loan for 64.5 months or a little over 5 years. That can be daunting to say the least. Now, let’s see what the power of an extra $250 can bring.
If you take the money you make from renting out your car with RelayRides and add it to your regular monthly payment, then you will end up paying $607.91 per month. If you make this payment each and every month, then you will end up cutting 2 years and 5 months off your loan term. Your overall loan term will then be cut down to 35.5 months.
Not only will you pay off your loan quicker, you will also save $1,969 in interest payments. Instead of paying $4,183 of interest to the lender, you will now only pay $2,214. Now, that is empowering!
So, while the $250 might not sound like a whole lot, it can really provide some tempting benefits. If you have an auto loan and rent out your vehicle via RelayRides, then you can bring down the total amount that you pay along with the amount of time. You can easily calculate how much you can save with RelayRides with this Bankrate calculator. Making extra money to pay off a loan faster doesn’t have to be hard.