playing off the other financing car thread.....financing question

[marshallandcartersmo]

Generally speaking, is it smarter if we're going to go the new car route......to finance a new car at 0%, or take the cash back option to put down on the car and do the new car financing (around 4.50%).

I'm sure there's a formula out there to use, but I don't know where.

thanks

 

[CowboyCO]

Generally speaking, is it smarter if we're going to go the new car route......to finance a new car at 0%, or take the cash back option to put down on the car and do the new car financing (around 4.50%).

I'm sure there's a formula out there to use, but I don't know where.

thanks

If you plan to pay off the car in full, then 0% is usually the better deal. If you plan to own the car for a couple of years and trade it in or sell it, then take the money.

 

[marshallandcartersmo]

If you plan to pay off the car in full, then 0% is usually the better deal. If you plan to own the car for a couple of years and trade it in or sell it, then take the money.

we buy cars and drive them till the wheels fall off, . This one will be to replace DH's 1995 truck, so we'll get another new truck, finance it, and hopefully drive it another 15+ years.

 

[bumbershoot]

It's not a perfect site, but I've used whatsthecost.com for calculating what I would pay in interest over time.

With 0%, obviously the price of the car is what you'll pay total.

So put the total in with 4+%, with what you assume your payments will be, and see if the total interest you'll pay is more or less than the cash back.

 

[TxRabbit]

Generally speaking, is it smarter if we're going to go the new car route......to finance a new car at 0%, or take the cash back option to put down on the car and do the new car financing (around 4.50%).

I'm sure there's a formula out there to use, but I don't know where.

thanks

If (cash back amount) is greater than (total interest paid), then the cash back option is the way to go, because it doesn't cost you anything to finance the car.

To make this equation be in your favor, consider if there is a prepayment penalty on the car loan (is there such a thing?) and whether or not you would see the loan to maturity or pay it off early.

If (cash back amount) is less than (total interest paid), then the 0% financing will be the overall money saver.

Cash flow could be an issue though. If you need the cash back for a down payment, then this may be what you have to do to get the car.