[sabres07]

When buying a new car you are usually presented with two financing options: 1- Factory and dealerships rebates apply if you finance through them, which lowers the principal <or> 2- Take 0% interest financing with no factory rebates.

Essentially it becomes a number crunching game and you take the option that costs the least over the life of the loan. But what happens when the monthly payment works out to be the same, within a dollar or so? Does it make sense to take the rebates and pay interest? My thought is yes, because you are lowering the principal on your loan and if you need to trade or sell within a few years, you have more equity. Any thoughts????

 

[rothjm]

I'd go to a loan calculator and plug in both numbers.
Betting the zero percent comes up better...

http://www.bankrate.com/calculators/auto/auto-loan-calculator.aspx

 

[ScottC]

For sure, take the loan with the interest. You could call any loan a 0% interest loan if you just jack up the principle enough. That's all that's happening here - no magic.

By starting with a lower principle, you can pay off the loan early and save on interest. Or, if you get rid of it, you'll technically save the remaining interest vs the 0% loan.

 

[eyecell007]

Clearly the 0% interest loan isn't "free" so math is certainly needed. One of the major things to think about though is what discount rate to use for the rebate money. I know that this is getting technical but if that extra money allows you to pay down your mortgage or invest in a cd, bond, stock, whatever, that is really the decision. Hypothetically speaking, if the dealers were indifferent which loan you took, you'd be indifferent too assuming that whatever you'd do with the rebate money would earn you the same as the rate on the loan. For example, if the rate on the loan is 5% but you think you can earn 7% (or pay down your mortgage is paying more than 5%) then do that, if not, go with the 0%. All of this of course is if the numbers are identical between either loan. You didn't provide enough information for us to help with the math.

 

[sabres07]

Clearly the 0% interest loan isn't "free" so math is certainly needed. One of the major things to think about though is what discount rate to use for the rebate money. I know that this is getting technical but if that extra money allows you to pay down your mortgage or invest in a cd, bond, stock, whatever, that is really the decision. Hypothetically speaking, if the dealers were indifferent which loan you took, you'd be indifferent too assuming that whatever you'd do with the rebate money would earn you the same as the rate on the loan. For example, if the rate on the loan is 5% but you think you can earn 7% (or pay down your mortgage is paying more than 5%) then do that, if not, go with the 0%. All of this of course is if the numbers are identical between either loan. You didn't provide enough information for us to help with the math.

Thanks for the reply...I don't have actual numbers yet. I sat down at the local Chevy delaership and talked ball park numbers and when we crunched them, the payments at 0% interest with no factory rebates was within $1.00 of the payment with rebates applied (something like $3-4K, don't remember exaclty) and taking a 4% interest rate.

It would seem that applying rebates to the price of the truck and reducing the principal would be a better move.

 

[Molly's 70]

It would seem that applying rebates to the price of the truck and reducing the principal would be a better move.

I agree! :yes: Take the money & run. Get the amortization schedule & beat down the principal very early in the loan if possible. http://www.amortization-calc.com/

Good luck.

 

[grandsport]

Payment got to be roughly $30-$40 bucks a month less to take advantage of the low apr.:yes:

 

[FLASHED]

Try buying a used car with cash ,the salespeople wont even return my calls .