Santander Consumer USA Santander, Santander USA Won't allow payments to principal Fort Worth TX Texas

The above comment could be good in some situations, but may not be the best in all situations.   So while it may be well intentioned it may not be the best solution financially, especially if this would take you more than a month or two to build up your savings.

Your auto loan is accruing interest at a high rate of 25%, the best you will be able to get in a regular savings account is 1-2% on a much lower balance.  So depending on your balance this could be costing you a sigificant amount of money every month in interest, that by the time you are able to refiance..you actually wouldn't be better off in the end.

You need to review your contract to deterime what type of loan you have. Most likely you have a Simple Interest loan. If that is the case the more you pay off the less interest you pay. So regardless of how they allocate the payment your principal would be going down, and you would get to this same "equality" point to be able to refinance it.   The only thing if they refuse to allow a principal only payment is to continue to make the scheduled payment every month even if they say that no payment is required due to your pre-payment.   If you have Auto-Pay you may need to still make a manual payment in this case.

Now, as I said it is important to review the loan contract. As if you have a different type of loan, or a pre-payment penalty then neither of these methods would work in the long run.  I would also suggest not relying on them telling you that they don't accept principal only payments, I would look in the contract to see what it states about excess payments.

Good Luck

That's good advice, thank you. Lessons learned. now time to clean up the mess. 

I  am a consumer and have nothing to do with Santander at all.

To work around this issue, take the funds you were going to use to pay extra toward your principal balance and put them in your savings account.  Continue to pay your car loan on time each and every month. Track the value of your vehicle by using the various vehicle valuation websites.  Once you have enough savings to pay the difference, go to a credit union and refinance your current vehicle loan. Be prepared to pay down extra to meet the difference between the new amount financed and the old amount that needs to be paid off. That is where your savings will be handy.

By the way, the line used with you (come back in a year to refi) is one of the oldest lines around used by car dealers everywhere. They know you can't refi out of the deal unless you had put down a very large down payment or have extra cash to put down at the time of the refi. Besides that, car sales reps don't refi car loans, they trade you out from the old into a newer vehicle and that is one of the ways to make a bad situation worse. 

The best thing to do is to refi with a credit union as soon as you can do so. Good Luck.