Re: Early payoff..... - Saab 9-3SS Bulletin Board - Saabnet.com
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Re: Early payoff.....
Posted by floppymoose (more from floppymoose) on Sat, 29 Jul 2006 17:25:17
In Reply to: Early payoff....., Mike Lynch [Profile/Gallery]
, Tue, 25 Jul 2006 13:31:31
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I did some more thinking about this. It's looking like the loan may be the way to go, even if you have the cash. Here's my reasoning:
Assume you can buy it with cash for $30K, or use the 0% loan for 60 months for $33K. Also assume you can get 4.5% on your money (I'm getting 5% right now but my rate is variable and 5% is very high for a savings account).
Your payments on the loan would be $550. So I'm going to compare paying $30K and then depositing $550 into savings for 60 months, vs having $30 already in savings and paying a $550 loan payment for 60 months. For simplicity pretend we have exactly $30K in savings already.
I'm also assuming - and this is important - that you can afford $550 a month aside from your savings. In the buying case the $550 goes to replenishing savings. In the loan case the $550 goes to paying the loan (without disturbing your savings).
Buying:
savings starts at 0 (spent it to buy the car)
$550 a month into savings at 4.5% for 60 months = $36,913
Loan:
savings starts at $30K
$550 a month to loan payment (0%, 60 months, $33K loan)
$30K getting 4.5% interst for 60 months = $37,385
After 5 years, either way you have the car. But you finish with a few extra dollars if you take the loan.
There are other tradeoffs to consider, but one in the loans favor is that you keep your cash reserves.
posted by 208.201.231...
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