first loan in 23 years

[feh]

We're purchasing a new car, and the manufacturer is offering 0% interest for 4 years. So, we are applying for a loan for the first time since 1993.

Mathematically, it makes sense - keeping that money in savings (as opposed to paying cash) will cut 2% off the cost of the car. If I'm able to make payments w/ a rewards card, that will be another 2%.

On the emotional side, after not owing anybody money for so long, it makes me feel oogly.

[Fishindude77]

Hey, when you are free and clear of debt, you have the luxury to do whatever you want. Enjoy the new car !

[corn18]

We're purchasing a new car, and the manufacturer is offering 0% interest for 4 years. So, we are applying for a loan for the first time since 1993.

Mathematically, it makes sense - keeping that money in savings (as opposed to paying cash) will cut 2% off the cost of the car. If I'm able to make payments w/ a rewards card, that will be another 2%.

On the emotional side, after not owing anybody money for so long, it makes me feel oogly.

I assume the 2% is the interest you earn on the money that is in savings? In addition to that, you earn the cost of money. Inflation is running 2% is, so you save 2% a year in purchasing power as well. As long as you can afford to pay cash, financing at 0% is simply a numbers game with some psychology thrown in.

[disneysteve]

If I'm able to make payments w/ a rewards card, that will be another 2%.

I'd be shocked if you can make auto loan payments with a credit card. Let us know if that works.

[Jluke]

If I'm able to make payments w/ a rewards card, that will be another 2%.

Like disneysteve said, doubt you can make monthly payments with a rewards card.

you may want to consider putting part of your downpayment on the credit card to get rewards. my dealer allows a max of $2500 on a credit card.

I'd also do the math and target to pay it off in 3 years - you'll grow tired of having a monthly payment after all of those years of not having one.

[feh]

Like disneysteve said, doubt you can make monthly payments with a rewards card.

Yeah, I realize it's a long shot, but I'm hoping.

you may want to consider putting part of your downpayment on the credit card to get rewards. my dealer allows a max of $2500 on a credit card.

Already did!

I'd also do the math and target to pay it off in 3 years - you'll grow tired of having a monthly payment after all of those years of not having one.

Nah, I'll ride the 0% train as long as I can. I won't like the first payment any more than the 36th payment.

[Roland123]

It would be ideal to see how much that 0% financing program actually costs the dealer.. Hence cash price is always cheaper obviously, though I could not pay cash personally!

[disneysteve]

It would be ideal to see how much that 0% financing program actually costs the dealer.. Hence cash price is always cheaper

Bingo! "Free" financing is rarely if ever actually free. It's factored into the sale price typically.

That's why places like furniture stores will offer 0% financing for 3 years or more but if you read the tiny print, it usually says 10% discount for cash purchases, so the "free" financing is far from free.

[corn18]

Bingo! "Free" financing is rarely if ever actually free. It's factored into the sale price typically.

That's why places like furniture stores will offer 0% financing for 3 years or more but if you read the tiny print, it usually says 10% discount for cash purchases, so the "free" financing is far from free.

What do you base this assertion on? I negotiated the car I bought this year as a cash deal. Got a final price agreed to and was writing the check. I asked about financing and they said if I financed, I would get an additional $750 off the price of the car. I financed it with 75% down and paid the loan off the same day the letter came in the mail with the first payment due. Cost me $13 interest.

So, my data point of one indicate that the cash price was higher than the finance price.

Tom

[disneysteve]

I negotiated the car I bought this year as a cash deal. Got a final price agreed to and was writing the check. I asked about financing and they said if I financed, I would get an additional $750 off the price of the car.

They agreed to a price and then gave you another $750 off for taking 0% financing? That was quite a deal. I wonder how they justified that one. Maybe they get some incentive for each financing deal they sign.

ETA: Wait, you said it cost you $13 interest. It wasn't 0%. That's why they were willing to lower the price if you financed. That makes sense now.

[corn18]

They agreed to a price and then gave you another $750 off for taking 0% financing? That was quite a deal. I wonder how they justified that one. Maybe they get some incentive for each financing deal they sign.

ETA: Wait, you said it cost you $13 interest. It wasn't 0%. That's why they were willing to lower the price if you financed. That makes sense now.

I think that's it. It was 1.9% interest. I guess they were counting on me keeping it financed so they could make their $750 back. Too bad for them, eh?

[disneysteve]

I think that's it. It was 1.9% interest. I guess they were counting on me keeping it financed so they could make their $750 back. Too bad for them, eh?

Don't feel too sorry for them. You are a rare breed. The vast majority of buyers will keep that loan til the very last payment and pay thousands in interest. That's why they can easily afford to knock $750 off the price.

[feh]

It would be ideal to see how much that 0% financing program actually costs the dealer.. Hence cash price is always cheaper obviously, though I could not pay cash personally!

In this situation, financing was offered by the manufacturer, not the dealer. I think it is an incentive to help dealers get rid of their 2016 models.

So, in this case it didn't cost the dealership anything.

[Like2Plan]

Congratulations on your new purchase. What kind of car are you buying?

[Jluke]

Don't feel too sorry for them. You are a rare breed. The vast majority of buyers will keep that loan til the very last payment and pay thousands in interest. That's why they can easily afford to knock $750 off the price.

$26,500 loan at 1.9% for 60 months is only $1300 in interest (for example purposes).

Edit: not applicable to large loans or high interest rates. Of course it is all relative to your financial situation.