You don't get all the rebates if you take the 0% financing

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2comma
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You don't get all the rebates if you take the 0% financing

Post by 2comma » Sat Sep 22, 2018 2:24 am

I just bought a new Ford truck today assuming I'd get all of the rebates and 0% financing but found out I'd loose a $1500 rebate if I took the 0%. I took the rebate. I haven't seen the numbers yet but the salesperson said she thought the rate would be about 5.5% (I'm guessing the duration is 60 months but it could be 72), I haven't talked to the finance mgr yet to get the exact numbers, that's tomorrow. I was thinking I'd take a 0% loan and keep investing the money but now, to get the deal done, I have a "less than 0% loan" which would cost me almost $5700 in interest on a $39000 loan. That's not going to happen.

I've always paid cash for cars but was (incorrectly) thinking I might start tapping into my retirement savings (I'm 63 and retired) so I might save some money on taxes by taking the 0% loan and spreading the withdrawals over several years. Now it looks like I'm looking for a low interest rate loan which combined with the $1500 rebate might still be a good idea. My credit union claims to have "as low as 2.49%" for 60 months (in the past they've never had good savings rates or loan rates so it could be much higher in this case) but I'm still wondering if this loan idea could make sense if I find a low enough rate. I haven't seen any better rates and most online seem to want you to apply to find out their going rate. Last I checked my credit score was over 800 but I don't think the going rates for car loans (I guess it would be a refinance car loan) are low enough to make sense. I have most of the money available almost immediately and the rest is in a Northwest Credit Union CD that is going to be available in early October. The dealership asked if I'd make 3 payments using Ford Motor Finance before I switched the loan or paid it off so they get their cut. I'm ok with that but I'm starting to think it isn't worth the money/hassle to refinance and I should just, as usual, pay cash.

I searched the Forum and didn't find any great rates that are still available now. Anybody know of somewhere that has a low interest rate loan that might make sense? I've been debt free for decades and strongly lean that way but I'm wondering if any of you can think of a way to make this work. If I could save $100-200 I probably wouldn't bother but if I could save more than $500 I'd be willing to endure the hassle of debt for 5 years or so.
If I am stupid I will pay.

criticalmass
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Re: You don't get all the rebates if you take the 0% financing

Post by criticalmass » Sat Sep 22, 2018 2:38 am

2comma wrote:
Sat Sep 22, 2018 2:24 am
I just bought a new Ford truck today assuming I'd get all of the rebates and 0% financing but found out I'd loose a $1500 rebate if I took the 0%. I took the rebate. I haven't seen the numbers yet but the salesperson said she thought the rate would be about 5.5% (I'm guessing the duration is 60 months but it could be 72), I haven't talked to the finance mgr yet to get the exact numbers, that's tomorrow. I was thinking I'd take a 0% loan and keep investing the money sense. I have most of the money available almost immediately and the rest is in a Northwest Credit Union CD that is going to be available in early October. The dealership asked if I'd make 3 payments using Ford Motor Finance before I switched the loan or paid it off so they get their cut. I'm ok with that but I'm starting to think it isn't worth the money/hassle to refinance and I should just, as usual, pay cash.

I searched the Forum and didn't find any great rates that are still available now.
That’s typical. The manufacturer incentive offer details list all of the conditions, and often special financing by Ford means you lose out on certain “cash” rebates.

You were smart to go for the cash. For an excellent credit score and a brand new vehicle 5% sounds crazy high. Note that this is probably the dealer making a (high commission for them) arrangement with a local institution of their choice, while Ford incentive (subsidized) loans would be through Ford. Unless using an incentive rate, you can often do better on your own, before you enter the dealer.

Which rate engine forum did you search? Even penfed is advertising 2.49% for new cars up to $100k, and even lower if you use their car buying service (likely just truecar or similar).

Good luck!

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Nestegg_User
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Re: You don't get all the rebates if you take the 0% financing

Post by Nestegg_User » Sat Sep 22, 2018 3:54 am

as I said earlier in another thread, take the rebate to reduce costs, then pay off in one (maybe two if required) months...
it gives the dealer a positive hit on their “metrics” and gets you the rebate that reduces your cost more than the small interest you pay (you are pretty much stuck with one month, but after that just make sure there’s no pre-payment penalty)

dabrian
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Re: You don't get all the rebates if you take the 0% financing

Post by dabrian » Sat Sep 22, 2018 4:15 am

Look to refi immediately. DCU, Penfed, etc..Dealer can make money on the next guy/gal.

Gretchen
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Re: You don't get all the rebates if you take the 0% financing

Post by Gretchen » Sat Sep 22, 2018 5:44 am

2comma wrote:
Sat Sep 22, 2018 2:24 am

I've always paid cash for cars but was (incorrectly) thinking I might start tapping into my retirement savings (I'm 63 and retired) so I might save some money on taxes by taking the 0% loan and spreading the withdrawals over several years.
We've taken a car loan for the same reason, to avoid tax bracket creep if we paid in full this year. We bought a high-end Jeep to take off-road a lot, and there were no financing deals because it's in demand and there aren't many. We were able to tap our HELOC for a special one-year promotional rate of 2.99%, which will float up to market next March. If there are no good deals available to refinance, we'll just pay off the remainder.

Mike Scott
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Re: You don't get all the rebates if you take the 0% financing

Post by Mike Scott » Sat Sep 22, 2018 8:12 am

penfed.org often has good auto loan rates

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grabiner
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Re: You don't get all the rebates if you take the 0% financing

Post by grabiner » Sun Sep 23, 2018 12:00 pm

2comma wrote:
Sat Sep 22, 2018 2:24 am
I just bought a new Ford truck today assuming I'd get all of the rebates and 0% financing but found out I'd loose a $1500 rebate if I took the 0%.
The way to evaluate this type of deal is to compare the effective interest rate. If you can pay $28,500, or pay $30,000 with 0% interest financing, then the 0% loan is actually a loan of $28,500 with total payments of $30,000. Such a loan would have a 2.54% APR if it is a four-year loan.

If you do need the loan, this is the rate to compare versus taking the rebate and getting a loan from your bank instead, or from the dealer at the regular rate.
Wiki David Grabiner

bhsince87
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Re: You don't get all the rebates if you take the 0% financing

Post by bhsince87 » Sun Sep 23, 2018 1:49 pm

I bought an F-150 about 2 years ago. I told the salesman I was willing to pay cash but would finance it if I could get a better deal.

Their finance guy ran the numbers and the best deal was if I financed $20k at 4.9% for 3 years. That got me another $750 off versus an all cash deal.

I paid it off in full the first month, and paid around $35 in interest.
Retirement: When you reach a point where you have enough. Or when you've had enough.

Cash is King
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Re: You don't get all the rebates if you take the 0% financing

Post by Cash is King » Sun Sep 23, 2018 2:25 pm

OP,
In the situation you describe taking the 0% financing is the better deal . The interest on $39,000 at 2.49% for 60 months is $2,519. If you apply the rebate and keep the same finance terms the interest is $2,422. So, since the rebate is not more than the finance charges 0% financing is the way to go.

Cheers.

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fortfun
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Re: You don't get all the rebates if you take the 0% financing

Post by fortfun » Sun Sep 23, 2018 3:55 pm

2comma wrote:
Sat Sep 22, 2018 2:24 am
I just bought a new Ford truck today assuming I'd get all of the rebates and 0% financing but found out I'd loose a $1500 rebate if I took the 0%. I took the rebate. I haven't seen the numbers yet but the salesperson said she thought the rate would be about 5.5% (I'm guessing the duration is 60 months but it could be 72), I haven't talked to the finance mgr yet to get the exact numbers, that's tomorrow. I was thinking I'd take a 0% loan and keep investing the money but now, to get the deal done, I have a "less than 0% loan" which would cost me almost $5700 in interest on a $39000 loan. That's not going to happen.

I've always paid cash for cars but was (incorrectly) thinking I might start tapping into my retirement savings (I'm 63 and retired) so I might save some money on taxes by taking the 0% loan and spreading the withdrawals over several years. Now it looks like I'm looking for a low interest rate loan which combined with the $1500 rebate might still be a good idea. My credit union claims to have "as low as 2.49%" for 60 months (in the past they've never had good savings rates or loan rates so it could be much higher in this case) but I'm still wondering if this loan idea could make sense if I find a low enough rate. I haven't seen any better rates and most online seem to want you to apply to find out their going rate. Last I checked my credit score was over 800 but I don't think the going rates for car loans (I guess it would be a refinance car loan) are low enough to make sense. I have most of the money available almost immediately and the rest is in a Northwest Credit Union CD that is going to be available in early October. The dealership asked if I'd make 3 payments using Ford Motor Finance before I switched the loan or paid it off so they get their cut. I'm ok with that but I'm starting to think it isn't worth the money/hassle to refinance and I should just, as usual, pay cash.

I searched the Forum and didn't find any great rates that are still available now. Anybody know of somewhere that has a low interest rate loan that might make sense? I've been debt free for decades and strongly lean that way but I'm wondering if any of you can think of a way to make this work. If I could save $100-200 I probably wouldn't bother but if I could save more than $500 I'd be willing to endure the hassle of debt for 5 years or so.
You might be able to get both if you work all the dealerships within 100 miles. Have you already signed the paper work? I'd negotiate, via email, with everyone within 100 miles. A few people have posted about doing this effectively the last year or two. Watty is one person that comes to mind.

Cash is King
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Re: You don't get all the rebates if you take the 0% financing

Post by Cash is King » Sun Sep 23, 2018 4:57 pm

fortfun wrote:
Sun Sep 23, 2018 3:55 pm
2comma wrote:
Sat Sep 22, 2018 2:24 am
I just bought a new Ford truck today assuming I'd get all of the rebates and 0% financing but found out I'd loose a $1500 rebate if I took the 0%. I took the rebate. I haven't seen the numbers yet but the salesperson said she thought the rate would be about 5.5% (I'm guessing the duration is 60 months but it could be 72), I haven't talked to the finance mgr yet to get the exact numbers, that's tomorrow. I was thinking I'd take a 0% loan and keep investing the money but now, to get the deal done, I have a "less than 0% loan" which would cost me almost $5700 in interest on a $39000 loan. That's not going to happen.

I've always paid cash for cars but was (incorrectly) thinking I might start tapping into my retirement savings (I'm 63 and retired) so I might save some money on taxes by taking the 0% loan and spreading the withdrawals over several years. Now it looks like I'm looking for a low interest rate loan which combined with the $1500 rebate might still be a good idea. My credit union claims to have "as low as 2.49%" for 60 months (in the past they've never had good savings rates or loan rates so it could be much higher in this case) but I'm still wondering if this loan idea could make sense if I find a low enough rate. I haven't seen any better rates and most online seem to want you to apply to find out their going rate. Last I checked my credit score was over 800 but I don't think the going rates for car loans (I guess it would be a refinance car loan) are low enough to make sense. I have most of the money available almost immediately and the rest is in a Northwest Credit Union CD that is going to be available in early October. The dealership asked if I'd make 3 payments using Ford Motor Finance before I switched the loan or paid it off so they get their cut. I'm ok with that but I'm starting to think it isn't worth the money/hassle to refinance and I should just, as usual, pay cash.

I searched the Forum and didn't find any great rates that are still available now. Anybody know of somewhere that has a low interest rate loan that might make sense? I've been debt free for decades and strongly lean that way but I'm wondering if any of you can think of a way to make this work. If I could save $100-200 I probably wouldn't bother but if I could save more than $500 I'd be willing to endure the hassle of debt for 5 years or so.
You might be able to get both if you work all the dealerships within 100 miles. Have you already signed the paper work? I'd negotiate, via email, with everyone within 100 miles. A few people have posted about doing this effectively the last year or two. Watty is one person that comes to mind.
It makes no sense for the dealer to give both knowing they will not be reimbursed for the rebate. They may still have room in the deal to reduce the selling price by the rebate amount but if not no deal!

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fortfun
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Re: You don't get all the rebates if you take the 0% financing

Post by fortfun » Sun Sep 23, 2018 7:12 pm

Cash is King wrote:
Sun Sep 23, 2018 4:57 pm
fortfun wrote:
Sun Sep 23, 2018 3:55 pm
2comma wrote:
Sat Sep 22, 2018 2:24 am
I just bought a new Ford truck today assuming I'd get all of the rebates and 0% financing but found out I'd loose a $1500 rebate if I took the 0%. I took the rebate. I haven't seen the numbers yet but the salesperson said she thought the rate would be about 5.5% (I'm guessing the duration is 60 months but it could be 72), I haven't talked to the finance mgr yet to get the exact numbers, that's tomorrow. I was thinking I'd take a 0% loan and keep investing the money but now, to get the deal done, I have a "less than 0% loan" which would cost me almost $5700 in interest on a $39000 loan. That's not going to happen.

I've always paid cash for cars but was (incorrectly) thinking I might start tapping into my retirement savings (I'm 63 and retired) so I might save some money on taxes by taking the 0% loan and spreading the withdrawals over several years. Now it looks like I'm looking for a low interest rate loan which combined with the $1500 rebate might still be a good idea. My credit union claims to have "as low as 2.49%" for 60 months (in the past they've never had good savings rates or loan rates so it could be much higher in this case) but I'm still wondering if this loan idea could make sense if I find a low enough rate. I haven't seen any better rates and most online seem to want you to apply to find out their going rate. Last I checked my credit score was over 800 but I don't think the going rates for car loans (I guess it would be a refinance car loan) are low enough to make sense. I have most of the money available almost immediately and the rest is in a Northwest Credit Union CD that is going to be available in early October. The dealership asked if I'd make 3 payments using Ford Motor Finance before I switched the loan or paid it off so they get their cut. I'm ok with that but I'm starting to think it isn't worth the money/hassle to refinance and I should just, as usual, pay cash.

I searched the Forum and didn't find any great rates that are still available now. Anybody know of somewhere that has a low interest rate loan that might make sense? I've been debt free for decades and strongly lean that way but I'm wondering if any of you can think of a way to make this work. If I could save $100-200 I probably wouldn't bother but if I could save more than $500 I'd be willing to endure the hassle of debt for 5 years or so.
You might be able to get both if you work all the dealerships within 100 miles. Have you already signed the paper work? I'd negotiate, via email, with everyone within 100 miles. A few people have posted about doing this effectively the last year or two. Watty is one person that comes to mind.
It makes no sense for the dealer to give both knowing they will not be reimbursed for the rebate. They may still have room in the deal to reduce the selling price by the rebate amount but if not no deal!
The vehicle is probably marked up about 25%, so they should have plenty of wiggle room.

RickBoglehead
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Re: You don't get all the rebates if you take the 0% financing

Post by RickBoglehead » Sun Sep 23, 2018 8:45 pm

fortfun wrote:
Sun Sep 23, 2018 3:55 pm

You might be able to get both if you work all the dealerships within 100 miles. Have you already signed the paper work? I'd negotiate, via email, with everyone within 100 miles. A few people have posted about doing this effectively the last year or two. Watty is one person that comes to mind.
Not a chance.

RickBoglehead
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Re: You don't get all the rebates if you take the 0% financing

Post by RickBoglehead » Sun Sep 23, 2018 8:53 pm

Refinance the same week. Run loan at PenFed's rate, versus zero percent and losing the rebate.

Often makes no sense to go with zero percent.

Next time do your research. Ford's rebates are on their website with terms. No guessing on term (it's 72).

Don't go back in. Tell them to email you all the numbers including invoice.

Great deal is invoice less holdback (3% of msrp) less rebates.

X-Plan is basically invoice and widely available.

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Re: You don't get all the rebates if you take the 0% financing

Post by whodidntante » Sun Sep 23, 2018 9:18 pm

It depends on the incentive structure offered at the time you buy. When I bought my Ford Mustang, I could get $1,000 in incentives, plus an additional $500 in incentives or 1.9% financing. That wasn't a fantastic rate. A local credit union was offering 1.89% for 60 months, so I took the cash from Ford and took the credit union financing. I financed every penny except for the $2,500 the dealer let me put on a rewards card.

I still see credit union rates advertised for about 2%, but they appear to be 36 month loans. I would still take that over paying cash. Rates have gone up since I got my loan but are still attractively low in my opinion, so I would rather be borrower than a lender right now.

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fortfun
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Re: You don't get all the rebates if you take the 0% financing

Post by fortfun » Sun Sep 23, 2018 9:26 pm

RickBoglehead wrote:
Sun Sep 23, 2018 8:45 pm
fortfun wrote:
Sun Sep 23, 2018 3:55 pm

You might be able to get both if you work all the dealerships within 100 miles. Have you already signed the paper work? I'd negotiate, via email, with everyone within 100 miles. A few people have posted about doing this effectively the last year or two. Watty is one person that comes to mind.
Not a chance.
Never know until you try.

2comma
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Re: You don't get all the rebates if you take the 0% financing

Post by 2comma » Mon Sep 24, 2018 1:07 am

Just to let everyone know I signed the papers and the loan was through Ford Motor Co - the rate was 5.9%! I've decided that I don't really need the liquidity and have more than enough in non-pretax savings to just pay the thing off. The dealership asked me to make 3 payments so they got their incentive and I'm ok with that.

Assuming I could find a 2.5% refinance loan and could find another 3%ish CD rate (Northwest FCU) I just don't if I'd bother or if it's worth it for this amount of money but I'm still pondering.

P.S. They financed everything, I didn't have to pay a cent up front. Seems pretty dangerous for someone that doesn't practice delayed gratification...

I wish I'd thought to put the max on a rewards credit card but I forgot about that in the heat of the battle.
If I am stupid I will pay.

RickBoglehead
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Re: You don't get all the rebates if you take the 0% financing

Post by RickBoglehead » Mon Sep 24, 2018 5:21 am

PenFed

NEW REFINANCE RATES

Vehicle's model year is 2019 or 2018.

2.49% 36 mos.
3.24% 48 mos
3.49% 60 mos
3.74% 72 mos
4.24% 84 mos

2comma
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Re: You don't get all the rebates if you take the 0% financing

Post by 2comma » Tue Sep 25, 2018 12:38 am

Penfed is the only one I found that had a "new" refinance rate plus they tell you what it is! The few other banks that posted a rate (I think they were used car rates which were higher. Seems like everyone else wants you to fill out an application before they tell you what your rate will be.

I think I finally wrapped my head around the numbers; not good at this. I'd pay $3558 interest on a 5 year 3.49% "new' refinance penfed loan. I found Citizens Access that had pretty good CD rates and created a ladder for 4 years (as the money was needed) and came up with $2316 in interest earned so that doesn't work.

If I'd had just taken the 0% loan and forgone the $1500 I'd be $816 ahead vs investing in a 4 year CD ladder. I think it's that simple.


If I'd financed ahead of time, when it was still a new car loan, penfed's rate is still 3.49 for a 60 month loan so $3558 in interest paid and $2316 interest earned. If I'd financed for 36 month at the 2.49% rate, I'd pay $1509 and earned $1293 in interest on a CD ladder so I still loose by $216.

If anyone sees a flaw in my logic or numbers please let me know.

I think I made an $816 mistake. In my 20's I got the pitch from a car dealer to finance and invest the rest, I'd come out ahead. I called my bank and talked to the manager and she said something along the lines of if you were an investor (risk free investment) would you loan money to others low enough so that they could borrow your money and invest it for more? I think this is an example of exactly that. Sure it can happen but I would think it's rare.

Of course what I'd really like to know is how much profit did Ford make to offer a 0% rate. I think I'll just pay the loan off and try to remember next time that a 0% loan might just be the way to go and that $1500 is is just a ploy on our instant gratification instinct.
If I am stupid I will pay.

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