In case anyone is interested, the lowest rate I found on a car loan was with Pentagon Federal Credit Union (yes, that Pentagon). They were at 3.49% APR for 60 months. They have some membership rules but if you don't qualify, it's easy to. No, not by enlisting but by joining a non-profit service group for $25 (tax deductible). The low rate, when compared to other rates I could find, more than made up for the $25 .
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3.25% for 60 mos. and 4.25% for 84 mos. at Alliance Credit Union.
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http://mshift.com/acu/hRateDetails.asp?cId=2
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http://mshift.com/acu/hRateDetails.asp?cId=2
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Yet many , many people have no choice. Just remember to purchase Gap insurance with the loan.
ZebRuaj
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Wait til you see 72 and 84 mo options from the finance guy.
jordanrb81
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rates are falling again. wait a week or two and you'll see offers for as low as 2.5% For those of you scoffing at 60-72 month loan offers a little economic truth. set to one side the difference between "covered" and "uncovered" debt. I don't believe in "uncovered" debt for much of anything for any interest rate or for any length of time. However, regarding covered debt. I financed $25,500.00 when I bought my 4Runner at 2.76% for 72 months So my car payment is $385.00 a month. Meanwhile the $25,500.00 I could have used to "pay cash" is earning 5% interest, I will pay $2,700.00 in interest over the life of the loan. Meanwhile due to the magic of compounding interest I'll make $8,500.00 on the money I didn't burn by using my own money to buy a car. for a net gain of $5,800.00 so... why wouldn't I want to do that? In any situation where you can earn more in interest than you're paying or even the same amount of interest you are better off. On a loan the principal amount that you pay interest on decreases year over year, meanwhile the principal amount you are saving increases year over year (compound interest) so even at the same rate, you end up with more cash by using OPM. this is how you make money in your sleep!
why is it crazy? the depreciation on a 4runner is low enough that short of some huge economic change that depresses the cost of SUVs you won't ever be underwater and auto loan rates are lower than the return you could get from that money elsewhere.
it looks like penfed rates have gone up a bit from when I got my loan, but let's use todays interest rate of 3.74% and assume a loan amount of $35k. after 1 year the balance is $28.5k, is a 1 year old 4Runner worth at least $28.5K? Yes. After 2 years the balance is $21.8K, is a 2 year old 4Runner worth at least $21.8K? Also yes. After 3 years the balance is $14.8K, is a 3 year old 4Runner worth at least $14.8K? Still yes. But if you're still really concerned about it, gap coverage only costs about $500.
using todays rates (3.74%), the cost of financing a $35K loan is $3,429. Over the same time period that same money in a high-yield savings account would earn you about $3,325 or if you parked it in CD savings you could expect a return >$5k, and if you put it in a mutual fund it would probably be higher.
60 month financing might put you upside down on a loan for a used vehicle, or for vehicles with a lot of depreciation, but on something like a new 4runner you might as well take advantage of the low auto loan rates.
jordanrb81
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the math doesn't change vehicle to vehicle, except dodge or GM are more likely to offer 0% interest which is an even better deal, as you get to use someone else's money for free. I recommend putting 30% down on a new car and 25% down on a used car. even if you buy the Ram Rebel or the Silverado Trail boss NEW (both around 60k) if you put $18,000.00 and finance the remaining $42,000.00 for 72 months you're probably not going to end up upside down. Further if you read my original comment you'll see I mentioned covered debt. So if you have the ability to pay off your loan on any day of the week, being upside down on a loan is really not a concern.
jordanrb81
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Literally explained basically the same thing about a week ago!! :lmao:
jordanrb81
New member
a car buying process is key. I call ahead give a stock number and schedule an appointment. I already know what I am looking for in a price for the car, and my trade if I have one. I take the time to contact my local credit union and get a tentative approval for the particular vehicle and an interest rate offer. After the test drive i tell the dealer "I got 2.74% for 60 months through the credit union, you're welcome to try and beat it, if you do I'll do business with you instead." Be disciplined, be informed. the more educated you are the less they can screw you. As mentioned I always put 30% down on a new and 25% down on a new, so i know my payments, interest rate and loan to value before I ever even speak to the dealer... I am also a total nerd.
Not everyone has that option.
I'd rather use someone else's money at 0-2.5% range than blast savings on a depreciating vehicle.
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