Do car loans have prepayment penalties?

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asked Apr 14 in Buying & Selling by CaterpillarSick (300 points)
Do car loans have prepayment penalties?

1 Answer

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answered Apr 14 by LindaHartzell (9,370 points)
Some car loans have a prepayment penalty while other car loans do not have prepayment penalties.

The loan company or finance company should let you know whether or not you'd face a prepayment penalty for paying off the car loan early or not.

Finance companies make their money and profit by charging interests on the money lent to you to purchase the vehicle and when you pay off the car loan early the finance company doesn't make that money.

So some auto finance companies will charge a prepayment penalty but it's usually cheaper than the interests charges that you would pay if you kept the car loan full term.

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