Just curious...how it works and if it's worth it. My car will be 1 year old in August

 

It works by the bank taking more money in interest and you paying less principal on your car, so you owe more and more while it depreciates. AKA "buried" or "upside down" at even a greater rate than you were before.

It sometimes makes sense with a house and never makes sense with a car. If you have to do this with your car to lower your payments, you are driving too much car.

The only time it would make sense is if you feel you can make more money through investing with the monthly money you'll save in the payments. Get out a financial calculator and do some time value of money calculations. Of course if you didn't know this already, chance are you don't know how to make money with money so don't try it.

But to answer your questions:

1) You take out another loan and restart your term. If you hold your term constant and borrow your payoff (assuming it's lower than your original financed amount, which it won't be until half way through your loan unless you put money down) your monthly payment will go lower, but you'll pay more in the end.

2) I've never had to do it. If someone has they're either a financial genius and know how to work capital or they don't understand basic finance, or they bought too much car and can't afford their payments.

2004.5 Coupe/5AT/Ivory/Everything but front spoiler/Nismo CAI/Crawford V5

 

Thanks for the info. I don't think that i have too much car..it's just that i am in between jobs right now and was looking at options to keep money in the bank.