1) Is there a penalty for making larger monthly payments than the minimum?
Most of the time, no. 99.9% of auto contracts are simple interest loans that do not penalize you for paying them off early. However, if you have any doubts, you will need to read the finance terms you signed.
2) Do I have to specify to pay the excess to principal?
This depends. For example, I don't have to do this because I manage my car payment online and once the note is paid for the month, I can add the remaining amount to principle only.
However, if you are still sending in checks, I would recommend sending a separate check and placing 'apply to principle only' in the extra payment check.
If you don't do this, they could apply your extra money to the following month payment, which includes interest.
3) Can I write any of this off my taxes (California)?
Also depends.
As part of the Obama stimulus package, you can deduct any sales taxes on any NEW (only) cars purchased between February, 2009 and the end of this year.
The cost of the vehicle must be $49,500 or less and it must be a new vehicle.
Otherwise, it is no.
