Auto Loan Financing Question
Originally Posted by 1SICKLEX
Leasing is renting, I cannot recommend leasing over owning unless you HAVE to trade cars every 2 years and you dont mod or drive much.
Interest rates are going up as well.
What you can do is pay on time every month for a year and renegotiate or switch finance companies, they are in hot competiton to get your business.
Interest rates are going up as well.
What you can do is pay on time every month for a year and renegotiate or switch finance companies, they are in hot competiton to get your business.
Thread Starter
Driver School Candidate
Joined: Jul 2006
Posts: 23
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From: NJ
All, thanks for the advice. My wife also mentioned that the rate we got was actually not that bad considering what the prime rate is now (apparently I should trust her more 
). I'll see if the finance department at the dealer can work any magic when I go to pick up plates, but barring that, it sounds like it makes sense for me to keep the loan for the time being.
And Kermee, I also hadn't really considered the point you made above, but that seems like an important consideration as well. My credit history is short and the only other installment loan I've had was for my first car in college, which I ended up paying off in under a year. A home purchase is on the horizon so it can't hurt to build up the credit rating a bit. Thanks for doing some number crunching as well to illustrate your point. I'll probably make some principal prepayments to reduce the finance charges. Maybe refinance in a year or so if rates have gone down.
Thanks again everyone.
Eric
). I'll see if the finance department at the dealer can work any magic when I go to pick up plates, but barring that, it sounds like it makes sense for me to keep the loan for the time being.
Originally Posted by Kermee
I wouldn't pull savings to pay off the loan for another reason and if I were to make an assumption, if your credit history is short (e.g. less than 8 years), keeping this installment loan and paying it on time, etc. will help your credit rating. And installment loans do a lot less damage to your credit score than revolving debt (e.g. credit cards).
Thanks again everyone.
Eric
Lexus Fanatic
Joined: Oct 2003
Posts: 94,696
Likes: 290
From: Virginia/D.C. suburbs
Here's my advice.........simple but effective.
Don't worry about the loan.
I assume you have enough cash in the bank to buy the car outright because you said that was an option. If so, just take that money you WOULD have spent on paying for the car in cash and instead buy a municipal bond issued in the state you live in. Any broker will be glad to sell you one and set you up an account. In many cases you will not even pay his / her commission on the sale because they often get that commission from the bond issuer itself.
Municipal bonds usually sell in $5000 blocks, ( 5, 10, 15, 20, etc.....) The better ones today pay around 5%...twice a year at 2.5%. But when you consider that the interest is double-tax-free if you live in that state, it is equivalent, depending on your tax bracket, of as much as the equivalent of 9% taxable. You are only paying 6.9% for the car loan...so the bond interest will actually pay off the interest on the loan for you...and then some. You will likely profit from it.
Don't worry about the loan.
I assume you have enough cash in the bank to buy the car outright because you said that was an option. If so, just take that money you WOULD have spent on paying for the car in cash and instead buy a municipal bond issued in the state you live in. Any broker will be glad to sell you one and set you up an account. In many cases you will not even pay his / her commission on the sale because they often get that commission from the bond issuer itself.
Municipal bonds usually sell in $5000 blocks, ( 5, 10, 15, 20, etc.....) The better ones today pay around 5%...twice a year at 2.5%. But when you consider that the interest is double-tax-free if you live in that state, it is equivalent, depending on your tax bracket, of as much as the equivalent of 9% taxable. You are only paying 6.9% for the car loan...so the bond interest will actually pay off the interest on the loan for you...and then some. You will likely profit from it.
Pole Position
Joined: Sep 2005
Posts: 215
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From: kjhklh
Originally Posted by flyfl1pguy
I agree with 1sicklex. Leasing is renting. Its just throwing away your money.
What an ignorant comment. I hate when people make blanket statements. If I want a new car every 3 years and don't want to put up with servicing the car when things start to go wrong at 50K+ miles I am going to lease the car. My monthly payment is much much less and I don't have to put squat down on the car.
When you finance you are putting a ton of money up front on a depreciating product. Dropping $40,000 on a new car is just about the absolute worst thing you can do for your money in the long run. So you keep that car for 7 years and have fun with the 5-8 thousand bucks you get back after you dump money into an extended warranty and servicing are you coming out ahead? Nope. I would rather invest that $40,000 and make money. But that is just me.
Even with that said, leasing isn't always better either. It depends on the situation. Stay away from the blankety statements and then you'll look a lot more intelligent.
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Posts: n/a
Originally Posted by VitB6
What an ignorant comment. I hate when people make blanket statements. If I want a new car every 3 years and don't want to put up with servicing the car when things start to go wrong at 50K+ miles I am going to lease the car. My monthly payment is much much less and I don't have to put squat down on the car.
When you finance you are putting a ton of money up front on a depreciating product. Dropping $40,000 on a new car is just about the absolute worst thing you can do for your money in the long run. So you keep that car for 7 years and have fun with the 5-8 thousand bucks you get back after you dump money into an extended warranty and servicing are you coming out ahead? Nope. I would rather invest that $40,000 and make money. But that is just me.
Even with that said, leasing isn't always better either. It depends on the situation. Stay away from the blankety statements and then you'll look a lot more intelligent.
When you finance you are putting a ton of money up front on a depreciating product. Dropping $40,000 on a new car is just about the absolute worst thing you can do for your money in the long run. So you keep that car for 7 years and have fun with the 5-8 thousand bucks you get back after you dump money into an extended warranty and servicing are you coming out ahead? Nope. I would rather invest that $40,000 and make money. But that is just me.
Even with that said, leasing isn't always better either. It depends on the situation. Stay away from the blankety statements and then you'll look a lot more intelligent.
I hate people that don't READ entire posts
Originally Posted by VitB6
What an ignorant comment. I hate when people make blanket statements. If I want a new car every 3 years and don't want to put up with servicing the car when things start to go wrong at 50K+ miles I am going to lease the car. My monthly payment is much much less and I don't have to put squat down on the car.
When you finance you are putting a ton of money up front on a depreciating product. Dropping $40,000 on a new car is just about the absolute worst thing you can do for your money in the long run. So you keep that car for 7 years and have fun with the 5-8 thousand bucks you get back after you dump money into an extended warranty and servicing are you coming out ahead? Nope. I would rather invest that $40,000 and make money. But that is just me.
Even with that said, leasing isn't always better either. It depends on the situation. Stay away from the blankety statements and then you'll look a lot more intelligent.
When you finance you are putting a ton of money up front on a depreciating product. Dropping $40,000 on a new car is just about the absolute worst thing you can do for your money in the long run. So you keep that car for 7 years and have fun with the 5-8 thousand bucks you get back after you dump money into an extended warranty and servicing are you coming out ahead? Nope. I would rather invest that $40,000 and make money. But that is just me.
Even with that said, leasing isn't always better either. It depends on the situation. Stay away from the blankety statements and then you'll look a lot more intelligent.
Lexus Fanatic
Joined: Oct 2003
Posts: 94,696
Likes: 290
From: Virginia/D.C. suburbs
Leasing is good in four potential situations:
One, if you use your car in buisness....you can deduct the lease payments on your taxes.
Two, as 1SICK said, if you want a new car every 2-4 years.
Three, if you don't drive a lot of miles each year and take diligent care of your car.
Four, if you want more car than you can afford in monthly payments. ( In the DC area here where I live, leasing helps keep a lot of luxury and exotic car dealers in buisness...people lease a lot of vehicles they can't afford to buy )
One, if you use your car in buisness....you can deduct the lease payments on your taxes.
Two, as 1SICK said, if you want a new car every 2-4 years.
Three, if you don't drive a lot of miles each year and take diligent care of your car.
Four, if you want more car than you can afford in monthly payments. ( In the DC area here where I live, leasing helps keep a lot of luxury and exotic car dealers in buisness...people lease a lot of vehicles they can't afford to buy )
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