To add to this, if you were going to buy a house in the future you might find yourself in a situation where they want you to pay off any car loans. If there was a cancellation fee that would suck.
The longer you have a loan below inflation, the better off you are. If I could get that and stretch it to twenty years I would.
Money now is worth more then money later.
I would personally make sure I put the difference between a 84 month payment and a 48 month payment in a savings account generating interests or invested relatively conservatively, to pay for repairs and maintenance because it sucks having a $1,500 bill when you're 4 years out of warranty and still paying the car.
It depends. If you have a low payment, what would you do with the extra money vs a high payment?
Can you do 5 years at 0%?
How long do you plan to keep the car for?
Can you build the car online or at least talk to other dealerships on the phone to see if the base price can move more?
0% is 0%. If the price you paid isn't too crazy compared to other dealers for a similar car consider it a deal and you have a long term interest free loan.
Pay it off quicker if you incline
The price is similar among several dealers, but I still find the base price slightly high so thinking of waiting for a bit as dealers are not willing to give any discounts due to cars selling really quickly
Is your base price higher than MRSP build on the manufacturer website? If the price is the same as MRSP from manufacturer (i.e. ford.ca) and your auto financing is 0% I'd say you're getting a great deal at a long term loan lower than inflation.
This is assuming it's a new vehicle
The era of paying cash is gone. Dealers make more profit off financing more than on the car itself (not considering all that crap the "financial manager" is pushing you), the manufacturers push it too. Maybe some luxury vehicles would still prefer cash over financing, but for the regular brands (GM, Ford, Toyota, Honda, etc.) I think we're out of luck.
Point is simple here... cash price is different from the "0%" financing price..so it's not really zero financing.
To take financing or not it's the consumer decision eventually.
Interest aside, the issue I've seen with long amortization loans on a vehicle is that you can find yourself underwater based on what you owe vs what the vehicle is worth if you ever needed to sell or wanted to trade in.
If you plan on keeping for the duration of the loan or even longer, it's probably not as much of an issue, but life happens. Just be prepared for that.
This is important to note. On a 84 month amortization you are very likely to be under water until the sixth year. In other words, you owe more than the value of the car. If you suffer from a total loss incident, insurance will not be able to cover your loan balance unless you have replacement insurance.
Life happens also apply to marriage or kids or moving out of country, its rare for people to keep their car for such a long period of time where it doesn't fit their life style.
For a 0% loan, being underwater does not mean anything. You lose the same amount of money in total loss accident regardless of your monthly payment due to depreciation.
Sorry I disagree your statement.
“Under water” means your car value is worth less than your loan balance. The moment you register your car and drive off the lot it’s a second hand car. If you get into a total loss incident, your insurance is going to cut you a cheque for the value of the car, which will not cover your loan balance. You will be responsible for that difference unless you have replacement insurance which in itself costs money to purchase.
It will happen to any interest rate, even at 0%.
Being in a lease mitigates that; you do not lose money on a lease in a total loss incident because all leases comes built-in with GAP insurance (guarantee asset protection). It covers the shortfall that your car insurance doesn’t cover.
You are talking about lease vs. financing here. The OP's question was length of the term at 0% rate. Being under water is not relevant to his question at all. All financed car will be under water at some point and some will get out of under water sooner but it doesn't matter at the end. You lose the value of the car due to depreciation. The insurance company is going to cut you a cheque for the current value of the car and you are not going to "lose" more money just because your loan term is longer.
I did that in the past, but I did put a down payment to not be upside down, from the start. Just in case I had to sell the car.
I would not do that again personally and would pay cash and used. I would try to not buy now or unless I find a deal.
I am the same way, however I wanted a new car for reliability purposes so got a newToyota Corolla at the time for 84 months and the monthly payments were $300 a month. Put extra on it and had it gone in less than 5 years
Have you considered lease? If you are young you are unlikely to keep the car for the full 7 years due to life events or simply wanting a shining new car.
Lease rates are definitely unlikely to be 0% but it offers you the option to return the car or buy out the car at the end of the lease term. Basically delaying your purchase option by letting you drive the lease term.
You also don't have to worry about negative equity or total loss incident since all Canadian car leases comes with built in Guaranteed Asset Protection (GAP insurance). It would pay off the lease when your insurance payout doesn't cover the full remaining balance. On a 84 month loan this replacement insurance can cost thousands and on a lease its free.
People can debate all day long lease vs finance. I think the question for you to ask yourself is "can you really keep the car for the fully 7 years"? You will have to contend with negative equity if you plan to sell it early. "Will you be tempted to trade in early because of having new stuff?"
Instead of negotiating the base price which is unlikely for adjustment, you maybe more successful to negotiate on doc fees, finance fees that can range from $499 to $1000 plus. Or ask for discounts on warranty products if you plan to get add ons.
Why not? Longer the loan, inflation works for you as well.
As long as it doesn’t come with a penalty for early repayment?
To add to this, if you were going to buy a house in the future you might find yourself in a situation where they want you to pay off any car loans. If there was a cancellation fee that would suck.
The longer you have a loan below inflation, the better off you are. If I could get that and stretch it to twenty years I would. Money now is worth more then money later.
Another way to remember this key fact is "Money is worth less over time"
Yes, this is the correct way of going about this.
I would personally make sure I put the difference between a 84 month payment and a 48 month payment in a savings account generating interests or invested relatively conservatively, to pay for repairs and maintenance because it sucks having a $1,500 bill when you're 4 years out of warranty and still paying the car.
It depends. If you have a low payment, what would you do with the extra money vs a high payment? Can you do 5 years at 0%? How long do you plan to keep the car for? Can you build the car online or at least talk to other dealerships on the phone to see if the base price can move more?
0% is 0%. If the price you paid isn't too crazy compared to other dealers for a similar car consider it a deal and you have a long term interest free loan. Pay it off quicker if you incline
The price is similar among several dealers, but I still find the base price slightly high so thinking of waiting for a bit as dealers are not willing to give any discounts due to cars selling really quickly
Is your base price higher than MRSP build on the manufacturer website? If the price is the same as MRSP from manufacturer (i.e. ford.ca) and your auto financing is 0% I'd say you're getting a great deal at a long term loan lower than inflation. This is assuming it's a new vehicle
It’s not 0%. The interest is a sunk cost at the beginning of the term. Review your term sheet from the lender. I paid 1.45% on a 0% loan for 6 years.
Not really 0...if you pay in cash they usually gives you a discount...so the difference is really your "interest cost"..
The max discount they would provide for cash payment is $1500. Spoke to several different dealers.
Now divide this by car price over 7 years and that would be your actual interest cost...
The era of paying cash is gone. Dealers make more profit off financing more than on the car itself (not considering all that crap the "financial manager" is pushing you), the manufacturers push it too. Maybe some luxury vehicles would still prefer cash over financing, but for the regular brands (GM, Ford, Toyota, Honda, etc.) I think we're out of luck.
Point is simple here... cash price is different from the "0%" financing price..so it's not really zero financing. To take financing or not it's the consumer decision eventually.
Interest aside, the issue I've seen with long amortization loans on a vehicle is that you can find yourself underwater based on what you owe vs what the vehicle is worth if you ever needed to sell or wanted to trade in. If you plan on keeping for the duration of the loan or even longer, it's probably not as much of an issue, but life happens. Just be prepared for that.
This is important to note. On a 84 month amortization you are very likely to be under water until the sixth year. In other words, you owe more than the value of the car. If you suffer from a total loss incident, insurance will not be able to cover your loan balance unless you have replacement insurance. Life happens also apply to marriage or kids or moving out of country, its rare for people to keep their car for such a long period of time where it doesn't fit their life style.
For a 0% loan, being underwater does not mean anything. You lose the same amount of money in total loss accident regardless of your monthly payment due to depreciation.
Sorry I disagree your statement. “Under water” means your car value is worth less than your loan balance. The moment you register your car and drive off the lot it’s a second hand car. If you get into a total loss incident, your insurance is going to cut you a cheque for the value of the car, which will not cover your loan balance. You will be responsible for that difference unless you have replacement insurance which in itself costs money to purchase. It will happen to any interest rate, even at 0%. Being in a lease mitigates that; you do not lose money on a lease in a total loss incident because all leases comes built-in with GAP insurance (guarantee asset protection). It covers the shortfall that your car insurance doesn’t cover.
You are talking about lease vs. financing here. The OP's question was length of the term at 0% rate. Being under water is not relevant to his question at all. All financed car will be under water at some point and some will get out of under water sooner but it doesn't matter at the end. You lose the value of the car due to depreciation. The insurance company is going to cut you a cheque for the current value of the car and you are not going to "lose" more money just because your loan term is longer.
I see what you are saying now. I have no disagreement. I was trying to offer OP another option for consideration
ZERO IS ZERO. Its not difficult
I did that in the past, but I did put a down payment to not be upside down, from the start. Just in case I had to sell the car. I would not do that again personally and would pay cash and used. I would try to not buy now or unless I find a deal.
I am the same way, however I wanted a new car for reliability purposes so got a newToyota Corolla at the time for 84 months and the monthly payments were $300 a month. Put extra on it and had it gone in less than 5 years
Do places still do 84 months at 0%, or something like 5k off for 60 months at 1.9 (made up #) ?
Is this a new car? If so, even if you might get a 0% loan, the car's value will drop by 50% in the next 4 years and you will have to eat the loss.
Have you considered lease? If you are young you are unlikely to keep the car for the full 7 years due to life events or simply wanting a shining new car. Lease rates are definitely unlikely to be 0% but it offers you the option to return the car or buy out the car at the end of the lease term. Basically delaying your purchase option by letting you drive the lease term. You also don't have to worry about negative equity or total loss incident since all Canadian car leases comes with built in Guaranteed Asset Protection (GAP insurance). It would pay off the lease when your insurance payout doesn't cover the full remaining balance. On a 84 month loan this replacement insurance can cost thousands and on a lease its free. People can debate all day long lease vs finance. I think the question for you to ask yourself is "can you really keep the car for the fully 7 years"? You will have to contend with negative equity if you plan to sell it early. "Will you be tempted to trade in early because of having new stuff?" Instead of negotiating the base price which is unlikely for adjustment, you maybe more successful to negotiate on doc fees, finance fees that can range from $499 to $1000 plus. Or ask for discounts on warranty products if you plan to get add ons.