interest rate for a car

[jerrytoyer]

i was talking to the bank and they are giving me 6% prime rate is that ok ?
nissan is giving me 1.9 for 2 years.

[advantage21]

Going with the car maker's promotional rate is your best bet if you are comfortable with the term. The banks won't come anywhere close to it.

[jerrytoyer]

thx

[beerbaron105]

i have 0% :P

[philelmo]

i've always wondered about the i rate advertised at dealers...

so is the actual rate %6 + %1.9? is it compounded annually?

[boyoflondon]

i've always wondered about the i rate advertised at dealers...

so is the actual rate %6 + %1.9? is it compounded annually?


1.9% is 1.9% ...

My dad got a new Escape back in January and the interest is 0%... He pays nothing on top of the base monthly payments.

[philelmo]

so why would anyone go with the bank?
what special terms does the dealer have?

[GBA]

not sure about 0% financing, but if it's like, 1.9, the payments that you make for the first few months are to pay off the interest alone. so say for 10k car loan, total amount would be 11,900? so you have to pay off the interest from your payments before paying for the car

wheras the bank includes principle with interest payments, and the interest is recalculated after every payment, so the interest paid goes down with every payment and more of your payments go to paying off the principle of the loan

not 100% sure about this, unfortunately >:(

[azndoughboi]

to calculate the payments, it's probably easier to set up an amortization schedule to see how much principal and interest you are paying each payment. If it is 1.9% this is an annual amount but the payments are usually montly. That 1.9% will be equivalent to 0.019^(1/12) compounded each month.

For example, if the loan is $10000, the amount of payments would be 10,000 = ( PMT/ i ) * (1 - 1/(1+i)^n ), and rearrange to solve for the payment...that's how you calculate the payment, sorry if it's a little too detailed...but it's for whoever's interested ...this applies to any loans

[Crowbarfoot]

I've read some stuff on the net about this. Going into the car dealership with cash ( from a bank loan ) even at a higher rate could save you money.

Something quick off the net:

If I can get special rate financing at the dealership, why would I finance my vehicle with Bank of America?

Special rate programs can be very attractive if they are offered for the vehicle that you want and have the appropriate terms; however, sometimes the loan terms are restrictive and you may desire different terms. Dealers often offer cash rebates as an alternative to low interest rates. Choosing the cash rebate and financing with us may prove more attractive to you.

Rebates plus low rates add up to savings

Rebates and special financing are factory-sponsored discounts intended to clear out slow-moving inventory, requiring qualifying buyers to choose one or the other. This is where getting your financing first can make a big difference. By opting for the rebate, applying it to your down payment, and combining that with low rate preapproved financing with us, you'll get the maximum savings.


0% Financing vs. Low Rate and Rebate (60-Month Term)

Rate 0% Annual Percentage Rate (APR) without rebate 4.59% APR with $3,000 rebate
Loan Amount $18,000 $15,000
Monthly Payment $300.00 $280.26
Total Cost $18,000 $16,815.57
Total Savings $0 $1,184.43

[max88]

so why would anyone go with the bank?
what special terms does the dealer have?

No one would go with the bank in that case...

Dealers should have inflated the price when giving out low rate financing deals - it seems that they get zero return on capital, but rather the return is embedded in the inflated price (higher markup).

Only a fool would pay cash when low rate financing is available, unless the return on cash less financing cost is not worth the time dealing with financing and payments.

[slim_shady]

Dealers should have inflated the price when giving out low rate financing deals - it seems that they get zero return on capital, but rather the return is embedded in the inflated price (higher markup).

Not necessarily. Using Mazda as an example, I bought my car with 0.9% financing, and the cost of the low rate (lost interest income) is shared by Scotiabank and Mazda Canada (the dealership is not affected by low factory-set financing rates). In my case, I was able to negotiate independent of the rate because it didn't matter to the dealer if I financed at 0.9% or 3.9%. (YMMV -- this is dependent on the brand, not individual dealership)