Saab: Best Auto APR US

On Mon, 12 Jan 2004 08:47:41 -0600, Dan <com> wrote:
 

Basic rules for those with a choice about how to finance (i.e. you
have a little financial flexibility):

- only borrow if you don't have the cash on hand to pay cash *or*
you can get more money (interest/dividend/capital gain) on the
money you don't spend vs. the interest rate they charge you.

I assume you need to borrow the 24K... so let's talk about the
$3K. If you take it, you can invest it. How much can you make on
the investment (per year)? Compare that to the difference in
interest rate. In other words (effectively), Saab will give you
$3K to pay the 4.9% rate. How much more does that cost you vs.
the 1.9% rate per year? How much can you make on the $3K ? Pick
the best number.

Also... consider what happens if you take the 3K and just pump it
back into the car. Since your rate on that 3K is 4.9%, I'm guessing
that you can only beat it with a stock type investment. So, it
might make sense to do take it and reduce the loan amount.

As to 3 vs. 4 years, it's really the same calculation for the raw
$'s. How much does it cost, how much do you make on the money you
don't pay out each year by taking a 4 year vs. 3 year loan ? You
are getting a lower payment... you can make money off the
money you don't give to the bank - but it cost you for more
years. If you're losing money, you want to lose it for as short
a time as possible. ALl of this ignores the bigger issue: do you
need the longer loan or a lower payment to make your finances
work in the short term (knowing it is costing you more in the
long term).