question about 0% vehicle financing

[zamboni crash-test dummy]

Nissan is running 0% financing (36 months) for March. I'm preapproved but I'm not clear on the fine print (in bold):

Financing is subject to NMAC Tier 0 through Tier 1 credit approval. $27.78 per month per $1000 borrowed at 0.0% for 36 months, $17.05 per month per $1000 borrowed at 0.9% for 60 months, or $15.15 per month per $1000 borrowed at 2.9% for 72 months

What does '$27.78 per month per $1000 borrowed at 0.0%' mean if it's 0% financing? If I take 0% I cannot get the $2000 rebate so I'm trying to calculate the better deal...

 

[IrishHockeyFan]

Re: question about 0% vehicle financing

If you borrow 20,000 to buy the car and make 36 payments it comes to a payment of $555.60 a month. $27.78 for each of the twenty $1000 increments of the borrowed money. I believe the car buying rule of thumb is to always take the 0% as it is usually the better deal, but without all the details (finanace rate if you take $$$ back) I wouldn't be sure

 

[rufus]

Re: question about 0% vehicle financing

yeah, that's it, for every $1000 you borrow, you're payment is 27.78. If you can afford the monthly payment, then it makes sense to go for the 0%, but if that payment is gonna be a struggle for you, you might want to reconsider your options.

I've always been a proponent of pay the car off as soon as you can, so if you can make the 36 month payment it's fine. However, on my most recent car, I didn't have much of anything to use for a downpayment, so had to finance for a long term. Gonna get hammered in interest, but had no choice, the old car was pretty much disintegrating.

 

[Sar'nt]

Re: question about 0% vehicle financing

The other thing you'll want to know is if there is a penalty for early payment or refinancing. If not, then you'll almost always want to take the 0%, because you can pay it down much more quickly.

 

[unofan]

Re: question about 0% vehicle financing

The other thing you'll want to know is if there is a penalty for early payment or refinancing. If not, then you'll almost always want to take the 0%, because you can pay it down much more quickly.

I've never understood the penalty for early payment. You'd think companies would want to get paid faster, even if it meant they forgo'ed the "guaranteed" interest later on.

 

[ScottM]

Re: question about 0% vehicle financing

Anytime you can use somebody's money for 0% take it, even if it is for 36 months which will result in higher payments than a 48 or 60 month loan. At the very least you should still have equity in the car when the loan is paid off. As a practical matter, most states prohibit prepayment penalties for non-real estate loans and retail financing. However, don't buy GAP insurance, credit insurance or a service plan. Dealers make a ton of money off those products and they are not required by law or by any lender who wants to stay in business.

Moreover, read the contract before you actually sign it. F&I guys will often try to rush the process and cover up "packed" products that will add to your cost. The last time I financed my car, they had to do the contract three times before I signed it, even though they knew what I do for a living. And I told them I had actually designed the contract in question in a previous gig.

 

[Jason A]

Re: question about 0% vehicle financing

If you're considering going for the 0% financing, it means the payments are doable for you, and therefore you should go for it.

Two years ago I bought a new car at 0% for two years; the payments were not insignificant, but in May I'll have a two-year-old car that I'll hopefully keep for another 4-5 years with no payments.

If you can't swing it, don't, but if you know the payments and you're still thinking about it, then you can afford it.

 

[Sar'nt]

Re: question about 0% vehicle financing

I've never understood the penalty for early payment. You'd think companies would want to get paid faster, even if it meant they forgo'ed the "guaranteed" interest later on.

On promotional financing, they're not making money in interest.

 

[zamboni crash-test dummy]

Re: question about 0% vehicle financing

Is there a reason a person would ever want to pay off a 0% loan early?

 

[St. Clown]

Re: question about 0% vehicle financing

Is there a reason a person would ever want to pay off a 0% loan early?

If you're expecting some other expense to come down the pipeline that doesn't offer such attractive financing options, there may be incentive to pay off early. Or if you're looking to purchase a home, the extra outstanding debt could be frowned upon by mortgage companies during the approval process. There are a few reasons, but not many. Some people just don't like to carry a debt load if they don't have the need, regardless of the opportunity costs associated with paying off the debt early.

 

[pirate]

Re: question about 0% vehicle financing

Is there a reason a person would ever want to pay off a 0% loan early?

Echoing some previous comments, keeping a 0% out there can be a good use of the rest of your money...as long as the person in question is wise regarding the certainty of their income, other monies available and the use of disposable income.

If person A takes a 0% so they can buy a more expensive car... the whole "what payment can you afford?" approach, then I would recommend an alternative.

What car could you afford with interest, then buy that car with 0% and keep the interest for other matters. If you can only afford $250 a month and you use the 0% to buy a more expensive car, a depreciating asset, then I would suggest a better decision could have been made. Buy the $200 a month car and use the $50 to invest, pay down your mortgage etc.

If somebody saves $50/month on a car and spends it on crap while accumulating no savings in a 401k etc then it really doesn't matter what they choose.

If you have uncertainty regarding income (who doesn't) and don't have other assets that you could bring into the equation, then I would generally suggest paying down any loan.

If you have disposable income that you are investing and earning a return and have assets you could apply to the loan if something comes up then keep the 0% as long as you can.