Financing question for math geniuses 3% Vs $1500 rebate

scottmandue · 02-04-2006, 03:15 PM

Alright you number crunchers out there:

$15000 four year loan $1500 rebate at 7.2% of no rebate at 4.6%

I could calculate it out but I know some of you sicko's actually enjoy doing this sort of thing.

My gut feeling is the 4.6 is a better deal.

RANDY P · RANDY P's Garage

$15k @7.2% over 4 yrs= payments of $360.59 x 48= $17308.18-$1500 = $15808.18

vs.

$15k @ 4.6% / 48 mos =$342.73 x 48 payments = $16450.95.

Take the higher rate. Then accelerate (pay extra) payments.

rjp

Rodeo · 02-04-2006, 03:28 PM

And if you invest that $1,500 for 4 years and earn 10% compounded, you'll have an extra ..... well I can't do math, but somewhere around $700

Steve Carlton · 03:36 PM

$13,500 for 4 yrs @ 7.2% = $324.53/mo (deduct rebate from amount financed)

$15,000 for 4 yrs @ 4.6% = $342.73/mo

Take the rebate and get an "either or" contract and get 5.75% APR at CapitalOne .

$13,500 for 4 yrs @ 5.75% = $315.50/mo (deduct rebate from amount financed).

Same argument applies with $16,500 & $15,000 loans.

jorian · 02-04-2006, 03:36 PM

Do they deduct the 1500 off the 15K or send it to you after the fact?

Rodeo sign me up for 10% compounded.

Rick Lee · Rick Lee's Garage

Steve, totally AWESOME avatar!

Steve Carlton · 03:44 PM

Rebates are like down payments; they can be applied instantly.

Thanks, Rick. It really looked cool before I had to remove frames and compress it below 19.5K...

scottmandue · 02-04-2006, 04:51 PM

Thanks guys!

dtw · 02-04-2006, 04:58 PM

Even better - take the rebate and the loan at 7.2%, then flip the loan into something @ 5.X% ... they're easy enough to find. It's what I did when I got my truck last year, knocked another $1,500 in interest off my amortization. Accelerating payment, especially to your threshold of pain in the first year, also is hugely beneficial.

pwd72s · 02-04-2006, 05:25 PM

Beware of what car dealer sales managers call "rule of 78". A translation of that is that you pay all the interest up front. If that's the case, independent financing may be your best bet. Better yet, save ahead of time by paying yourself first, then just write a check for the damned thing. One backbreaking payment, a clear title, and ZERO interest. Of course, even then you lose the moment you drive off the lot...depreciation.