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The funny thing is, options 1 I got 0 APR loan. Option 2 was 5% APR loan. Options 3 and 4 were cash. So cash in my pocket, option 1 was the "best". I had no in

The funny thing is, options 1 I got 0 APR loan. Option 2 was 5% APR loan. Options 3 and 4 were cash. So cash in my pocket, option 1 was the "best". I had no initial outlay, the car dealer loaned me the money for free. So yes that is even 1 more reason why option 1 worked out best for MY case. But who knows when I next get a car what will be true.

Consultant32452 9y ago
Car dealers do not loan you money for free. Interest rates are low, but it costs them money to service that loan. What they did, since the dealership owns the bank, is they shoved their profit into the principle instead of getting it back in interest. In other words, they simply charged you more for the car. And even a 0% loan is a risk from a personal finance standpoint. Options 3 and 4 carried no risk, lower cash in hand, but higher positive monthly cash flow (because no monthly bill). This freed up your additional monthly cash flow which would have been spent on a car payment to be invested and earn a return.,
- kasey_junk 9y ago
  From the point of view of these calculations it doesn't matter that the principle included loan servicing or sales commissions or what have you. The cash flow calculations vs the cash on hand - risk costs are where the math happens but it is perfectly possible to walk away with the decision to buy new to work out better on certain models of car.
  - Consultant32452 9y ago
    What model of car?
    - kasey_junk 9y ago
      I saw this with inexpensive manual Japanese imports the last time I shopped ~4 years ago. In particular lowend civics & Subaru imprezas were holding their value such & the dealer incentives & financing made the calculation essentially even. I have friends that said the same thing about certain diesel sedans (pre mpg scandal) but never calculated it myself.
    - brianwawok 9y ago
      In my case above it was for the wife, so it was a Honda CRV. Small Japanese SUVs had a very very high value retention for the first 4-5 years. Something like maybe the sticker price new is 25k, but what you really pay is closer to 21k new. A 3 year old would be going for 17-18k. After the maths above, it ended up costing more per year to buy used.
- brianwawok 9y ago
  Loans = higher principle price is false. It could be true in some cases, but it was not in mine. I negotiated a cash rate. I had the cash in my hand, and I got the lowest possible cash price, after talking to 6 dealers. Once I had the price printed on paper including all fees, I then said sure I will do the 0% APR loan. My price did not go up a single dollar. Options 3 and 4 I could take that cash I would have spent on the car, and put into the stock market. It would have generated me 5-6% return, on average, over the life of my car.

Consultant32452 9y ago

Car dealers do not loan you money for free. Interest rates are low, but it costs them money to service that loan. What they did, since the dealership owns the bank, is they shoved their profit into the principle instead of getting it back in interest. In other words, they simply charged you more for the car. And even a 0% loan is a risk from a personal finance standpoint. Options 3 and 4 carried no risk, lower cash in hand, but higher positive monthly cash flow (because no monthly bill). This freed up your additional monthly cash flow which would have been spent on a car payment to be invested and earn a return.,

kasey_junk 9y ago
From the point of view of these calculations it doesn't matter that the principle included loan servicing or sales commissions or what have you. The cash flow calculations vs the cash on hand - risk costs are where the math happens but it is perfectly possible to walk away with the decision to buy new to work out better on certain models of car.
- Consultant32452 9y ago
  What model of car?
  - kasey_junk 9y ago
    I saw this with inexpensive manual Japanese imports the last time I shopped ~4 years ago. In particular lowend civics & Subaru imprezas were holding their value such & the dealer incentives & financing made the calculation essentially even. I have friends that said the same thing about certain diesel sedans (pre mpg scandal) but never calculated it myself.
  - brianwawok 9y ago
    In my case above it was for the wife, so it was a Honda CRV. Small Japanese SUVs had a very very high value retention for the first 4-5 years. Something like maybe the sticker price new is 25k, but what you really pay is closer to 21k new. A 3 year old would be going for 17-18k. After the maths above, it ended up costing more per year to buy used.
brianwawok 9y ago
Loans = higher principle price is false. It could be true in some cases, but it was not in mine. I negotiated a cash rate. I had the cash in my hand, and I got the lowest possible cash price, after talking to 6 dealers. Once I had the price printed on paper including all fees, I then said sure I will do the 0% APR loan. My price did not go up a single dollar. Options 3 and 4 I could take that cash I would have spent on the car, and put into the stock market. It would have generated me 5-6% return, on average, over the life of my car.