re: Is it super dumb to finance a vehicle for 72 months?

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I always thought that the dealership will make their profit one way or another. And that 0% interest is paid up-front in the cost of the vehicle. In other words, you would get a lower price if you didn't do 0%. Right or wrong?

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Somebody in life is always making money or they wouldn't be in business. I'm not too worried about someone "making money" on a basic Toyota Camry that is $25,000 brand new.

I financed a brand new Taco at 75 months for 2% and I am about a year and half away from paying it off. At the time I bought it, I did not want to put a ton down on a car and wasn't making nearly as much as I am now. Turned out to be a solid decision for me(at least in my eyes) and it was for a truck I truly wanted and didn't mind paying for. Also, if I had to sell it now for whatever reason I would get about $13k out of it including whats left on the loan. So how is this bad?

Let's assume for the sake of argument that we consider financing a vehicle (paying for a depreciating asset with borrowed money, with interest - however nominal) a necessary evil.

The min/maxers will come in here and say, "I can invest the payment and make money on it idiot" blah, blah, blah.

In every...single...case - vehicle financing costs you money in depreciation, period. 72-month is particularly subversive because it allows the folks who right ought to be in a $7500 beater to drive a $50k car because they can "afford" the payments. So, they pay $700 a month for 6 years instead of 1 year.

Pay as much as you can afford down, and finance for as short a period as you can, even if it hurts. Why? Because it's super dumb to do otherwise.

Just did a 2.9% 7 year note on my truck. Had a 14k trade in though. The extra interest was on a little over 1k difference between 5-7 year. Figured I'd take the lower monthly payment vs a little more interest over time.

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But if I can use my money all up front to pay for a 30K car, or I can use someone else's money at a rate less than inflation, why would I not at least consider it?

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Here is the limited situation - you have $30k in some liquid form that you can - seamlessly - write a check for the car you want.

IF under those circumstances, you finance the car and make the payments to keep that liquidity earning a greater rate than your APR? Yeah - you can finance in that very limited situation without hurting yourself.

I bet this applies to 5% or less of auto finance loans.

It is interesting to think about though. I drive an old used truck so I don't have a dog in this fight. if you have 30-40k to buy a new truck and you choose to invest the money and pay the note. What is the break even point or could it possibly be better to buy a new one over a used one based on the lower interest rates but larger depreciation.

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Only problem is you give up all manufacturer incentives to get 72 months at 0%. So you pay for it one way or another.

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That can be the case. I was going to do zero percent for 60 months, but then I found out that it was either that or the $2500 rebate.

I took the $2500 and paid cash. I also get a good deal of psychological satisfaction from not paying a monthly note, even if it might not always be the smartest financial play on paper.

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Means you can't afford it!!

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Only if you can't afford it. I financed my car for 72 months when I could have paid it off in 36. I'm paying 2% interest and didn't see the point in creating a mandatory monthly obligation which was higher than it needed to be.

In general, it's dumb to finance a vehicle at all, unless you are getting a really low rate.

It really just depends on the interest rate and your financial situation. 1.9% or less is perfectly fine IMO. You have a smaller monthly commitment, but you aren't wasting a ton in interest. Also, you could always pay extra principal (which I would recommend).