I don't follow this. If you are taking out a 72 month loan rather than a 60 month loan, but paying the extra amount equivalent to the 60 month loan difference each month, you will have it paid of in 60 months, no?? If the interest rate is the same this is all you are doing.admin said:Depends on how you use that loan. The credit union we used offered 5.49% for anywhere from 36 to 72 months. Of course we could have taken the same rate at the std 60 months, but by taking it at 72 months, we lowered the base monthly payment by about $60/month. Now we'll take that $60 savings and pay that much extra towards the principle each mont along with our normal payment. This means we'll have the exact same monthly payment as if we'd taken the 60 month loan, but since we're paying more principle each month, we'll have the car paid off in 4 years and 3 months, nearly a year quicker than the 60 month loan, while saving almost $1000 in interest payments.
You are ending up in the exact same place as would if you took out a 51 month loan. You're not saving any interest by taking the longer term and making extra interest payments if the interest rates were the same regardless of term. I suppose you've given yourself the flexibility to make a lower payment if you get in a financial bind.admin said:Depends on how you use that loan. The credit union we used offered 5.49% for anywhere from 36 to 72 months. Of course we could have taken the same rate at the std 60 months, but by taking it at 72 months, we lowered the base monthly payment by about $60/month. Now we'll take that $60 savings and pay that much extra towards the principle each mont along with our normal payment. This means we'll have the exact same monthly payment as if we'd taken the 60 month loan, but since we're paying more principle each month, we'll have the car paid off in 4 years and 3 months, nearly a year quicker than the 60 month loan, while saving almost $1000 in interest payments.
Well, you actually should still compare. Right now my Home Equity line is at 8.9%, then use your top tax rate (lets say 30%, 25%federal, 5% state)- then your taxed rate would be 8.9% * ( 1.0 -.30 )= 6.23%. If your loan rate would be less than 6.23%, then you should go loan, if greater then Home Equity. That would be if your home equity would be fixed. If it is variable and goes up, then you have to figure your risk of home equity going up or down. Mine has gone from 5.5% 3 years ago to 8.9% now, but I can lock a 7.9% for a fixed term if I like.fenwah said:I don't really recommend this...but if you were to use your home equity line of credit towards your car purchase, you would be able to write off the interest on your car purchase come tax time. The caveet however is that if for some reason you can't make those HELOC payments on your car, then you jeapordize losing your home. But, my thought is is that if you aren't financially secure in the first place, then you definitely shouldn't be in the market for a new car.
You are wrong.loach said:You are ending up in the exact same place as would if you took out a 51 month loan. You're not saving any interest by taking the longer term and making extra interest payments if the interest rates were the same regardless of term. I suppose you've given yourself the flexibility to make a lower payment if you get in a financial bind.admin said:Depends on how you use that loan. The credit union we used offered 5.49% for anywhere from 36 to 72 months. Of course we could have taken the same rate at the std 60 months, but by taking it at 72 months, we lowered the base monthly payment by about $60/month. Now we'll take that $60 savings and pay that much extra towards the principle each mont along with our normal payment. This means we'll have the exact same monthly payment as if we'd taken the 60 month loan, but since we're paying more principle each month, we'll have the car paid off in 4 years and 3 months, nearly a year quicker than the 60 month loan, while saving almost $1000 in interest payments.
Tha tis only up to 36 months. His term look to be 51 mo if he contiues his normal payments.bkmartin said:I thought the 0% financing was extended until the end of the month. As long as that is going, it seems you should use that.
Brian
No, he is paying down his loan quicker with extra monthly payments.zman said:I don't follow this. If you are taking out a 72 month loan rather than a 60 month loan, but paying the extra amount equivalent to the 60 month loan difference each month, you will have it paid of in 60 months, no?? If the interest rate is the same this is all you are doing.admin said:Depends on how you use that loan. The credit union we used offered 5.49% for anywhere from 36 to 72 months. Of course we could have taken the same rate at the std 60 months, but by taking it at 72 months, we lowered the base monthly payment by about $60/month. Now we'll take that $60 savings and pay that much extra towards the principle each mont along with our normal payment. This means we'll have the exact same monthly payment as if we'd taken the 60 month loan, but since we're paying more principle each month, we'll have the car paid off in 4 years and 3 months, nearly a year quicker than the 60 month loan, while saving almost $1000 in interest payments.
I must not understand what you are saying.
I am not wrong. You are just missing my point. He is saving money by paying the loan off over 51 months instead of 72 mos. That's obvious, but that wasn't my point. My point was that he will have paid exactly the same amount of cash out by taking a 72 month loan and paying it off in 51 months as he would have if he just took out a 51 month loan (assuming same interest rate on either loan).NY_Joe said:You are wrong.
He is saving money in interest. If he took a 51 mo loan, if there is such a thing, he is paying interest on every penny he borrowed. By paying extra monthly, he pays down the principle and does not pay interest on it.
Somewhere, someone's math is way off on this. At 5.49%, on a 72 month loan, you flat out will not have 21 months of interest. Here are the 3 terms in question, I am using 25000 as the Purchase amount, because it was my first guess, and the difference between 72 and 60 months was $69, so I figured close enough.NY_Joe said:Every month he now has to pay $500. However, he sends in a check for $560. The $500 gets applied to the principle(loan amount) and to the monthly interest. The extra $60 is directly applied to the principle(loan amount). As he continues this month after month he is actually lowering the loan amount he owes them. So the loan will now be paid off sooner b.c the principle is being paid down quicker than the expected 72 months.
So, at the end of 4 yrs and 3 mo he will have his loan paid off and save paying the interest on 1 yr and 9 mo of loan payments. Any payment you make above and beyond the prescribed payment can be applied all to principal b/c you satisfied your monthly commitment to the loan.