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hendersonshands
LA-Lafayette Fan
Univ. of Louisiana Ragin Cajuns
Member since Oct 2007
149376 posts

Better to finance $31,800k at 4.19% or $35,100 at 0%?
If my math is correct, it would be about $200 cheaper to take the 0%. But my question would be is it worth it to try to refinance the lesser amount at a lower interest rate? Or would that be a gamble?

My wife and I both have credit scores around 750.


Speaking in terms of an auto loan.


good_2_geaux
LSU Fan
Member since Feb 2015
167 posts

re: Better to finance $31,800k at 4.19% or $35,100 at 0%?
Assuming equal terms, you are correct ~$203.

Will you be upside down on the loan if borrowing $35,100? If so you need to think of GAP insurance, which could cost $650-1000 defeating the purpose.

There is usually a fee to refinance ~$100. Maybe get pre-approved else ware for lower then the %4.19, get full disclosure of the new lein holder refinance fee and do some math opposed to making assumption of the availability of a lower rate



hendersonshands
LA-Lafayette Fan
Univ. of Louisiana Ragin Cajuns
Member since Oct 2007
149376 posts

re: Better to finance $31,800k at 4.19% or $35,100 at 0%?
quote:

Will you be upside down on the loan if borrowing $35,100?


I don't believe so.


Followup question: In the case of the 4.19% would it make sense to put money down? Is there an amount to put down that would make the vehicle cheaper?


good_2_geaux
LSU Fan
Member since Feb 2015
167 posts

re: Better to finance $31,800k at 4.19% or $35,100 at 0%?
quote:

would it make sense to put money down?


In my opinion, it depends on your own specific financial situation. If you have the cash, why not put it down?

quote:

make the vehicle cheaper


The amount you put down doesn't make the vehicle cheaper. And maybe I'm misunderstanding your question, but a truck sold to you for $50,000 is a $50,000 truck whether you put $20,000 down and only finance $30,000 opposed to only putting $10,000 down and financing $40,000.
The only way to make a vehicle "cheaper" is to negotiate a lower selling price.


Chad504boy
New Orleans Saints Fan
Member since Feb 2005
130359 posts

re: Better to finance $31,800k at 4.19% or $35,100 at 0%?
quote:

or $35,100 at 0%?


how is this even arguable?


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171
hendersonshands
LA-Lafayette Fan
Univ. of Louisiana Ragin Cajuns
Member since Oct 2007
149376 posts

re: Better to finance $31,800k at 4.19% or $35,100 at 0%?
quote:


The amount you put down doesn't make the vehicle cheaper. And maybe I'm misunderstanding your question, but a truck sold to you for $50,000 is a $50,000 truck whether you put $20,000 down and only finance $30,000 opposed to only putting $10,000 down and financing $40,000.
The only way to make a vehicle "cheaper" is to negotiate a lower selling price.


No, you're right. I worded that incorrectly. I meant that at what point is the total amount of the loan w/interest less than taking the 0%?


KamaCausey_LSU
Member since Apr 2013
5984 posts

re: Better to finance $31,800k at 4.19% or $35,100 at 0%?
A simple interest calculator says that the cash incentives are worth it if you plan on putting down any more than say $2000.


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BZ504
LSU Fan
Member since Oct 2005
902 posts
 Online 

re: Better to finance $31,800k at 4.19% or $35,100 at 0%?
Assuming, that’s the choice from a dealership. How many years? At 5, it’s pretty much a wash if you plan to payoff in 5 years. If like 4 years, take the $31k


hendersonshands
LA-Lafayette Fan
Univ. of Louisiana Ragin Cajuns
Member since Oct 2007
149376 posts

re: Better to finance $31,800k at 4.19% or $35,100 at 0%?
5 years


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momentoftruth87
Arkansas Fan
Member since Oct 2013
24027 posts

re: Better to finance $31,800k at 4.19% or $35,100 at 0%?
quote:

The amount you put down doesn't make the vehicle cheaper. And maybe I'm misunderstanding your question, but a truck sold to you for $50,000 is a $50,000 truck whether you put $20,000 down and only finance $30,000 opposed to only putting $10,000 down and financing $40,000.
The only way to make a vehicle "cheaper" is to negotiate a lower selling price.



What?

If a vehicle is $35,100 and you put $5,100 down, the number financed would be $30,100 at whatever % interest. It would certainly make it cheaper. Generally every $1,000 you finance it is about $20. So if this dude put $5K down, he would roughly be saving $100 on his monthly payment.

My confusion (for OP) is, why would you finance @4.19% if you'd qualify for 0% at a higher amount? If this is for the same vehicle.


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saderade
New Orleans Saints Fan
America's City
Member since Jul 2005
23231 posts
 Online 

re: Better to finance $31,800k at 4.19% or $35,100 at 0%?
I’ll take the lower amount and refinance


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good_2_geaux
LSU Fan
Member since Feb 2015
167 posts

re: Better to finance $31,800k at 4.19% or $35,100 at 0%?
Im looking at this from a total out of pocket perspective, assuming the OP is doing the same.
If he/she finances for 60 months $31800 @ 4.19% rather than financing $35100 at 0%, the total out of pocket he spends on the loan is only about $203 different at the end of the 60 mths. (looking at the amortization of each option)

quote:

If a vehicle is $35,100 and you put $5,100 down, the number financed would be $30,100 at whatever % interest


agreed
The vehicle still holds the same value was my point. The OP would have less over all out of pocket expense the more money he puts down when financing with an interest rate above 0%.


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TheIndulger
LSU Fan
Member since Sep 2011
18214 posts

re: Better to finance $31,800k at 4.19% or $35,100 at 0%?
Why would you want to put any amount down at all if you can finance for 0%? Unless you are simply worried about being more in debt


hendersonshands
LA-Lafayette Fan
Univ. of Louisiana Ragin Cajuns
Member since Oct 2007
149376 posts

re: Better to finance $31,800k at 4.19% or $35,100 at 0%?
Putting enough money down on the 4.19% with the rebate can lessen the total amount paid.


TigerDeBaiter
LSU Fan
Member since Dec 2010
7557 posts

re: Better to finance $31,800k at 4.19% or $35,100 at 0%?
Not exactly sure what you mean by “cheaper” but,

Car A ($31,800) cost $3,300 less than car B.

4.19% loan on car A has a total expense of about $3,500 over the life of a five year loan vs zero (minus fees) of car B.

Over the course of 5 years you’d be better off with the nicer car IMO if you truly can’t finace the $31,800 at 0% too.


gobuxgo5
Ohio State Fan
Member since Nov 2012
6059 posts

re: Better to finance $31,800k at 4.19% or $35,100 at 0%?
I’m intrigued how OP is sure financing 35k then adding miles won’t create a GAP risk.

Also, what happens if you have it for 2 years and decide to switch it to a new car? You’ll be completely upside down for not taking the cash rebate

I’d buy it at 31k and pay it off as fast as possible


MikeBRLA
LSU Fan
Baton Rouge
Member since Jun 2005
11230 posts

re: Better to finance $31,800k at 4.19% or $35,100 at 0%?
quote:

Putting enough money down on the 4.19% with the rebate can lessen the total amount paid.


You did not mention anything about a rebate in the OP which means comparing the two loans is not an apples to apple comparison. Is the rebate in lieu of the 0% interest? If so then it really isn’t 0% (and it never is BTW). All they are doing is taking the amount of the rebate and pre-paying the interest on the loan with it.

You’d have to give us all of the specifics of each deal/offer in order to accurately give you financial advice. As of now it seems we are working with incomplete information.


lynxcat
Rutgers Fan
Member since Jan 2008
20054 posts

re: Better to finance $31,800k at 4.19% or $35,100 at 0%?
$35,100 at 0% is the answer. This is free money.


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21JumpStreet
Texas Tech Fan
Member since Jul 2012
10115 posts

re: Better to finance $31,800k at 4.19% or $35,100 at 0%?
You are overthinking. 0%. You owe nothing in interest. The other one, you lose money.


baldona
Auburn Fan
Florida
Member since Feb 2016
8886 posts
 Online 

re: Better to finance $31,800k at 4.19% or $35,100 at 0%?
I think the OP is leaving out some very KEY details. It sounds like the dealership is offering the same vehicle at 2 prices, either $31,800 at 4.19% or $35,000 at 0%?

If so OP, there should be a 3rd option C. If you have a 750 credit score you should be able to beat 4.19%. Buy the vehicle at $31,800 with a 3rd party loan. There’s new vehicle loans at 3% or under.


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