0% Financing on new car (Subaru)...how much to put down upfront?
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0% Financing on new car (Subaru)...how much to put down upfront?
i'll be looking to purchase a new vehicle, probably ~$28-30K total out the door.
i have a $6K trade in and $10K cash to put down on the vehicle, but as there is 0% financing for up to 48mo., i'm wondering if it makes more sense to hold onto the $10K cash and put it elsewhere - while borrowing "free" money.
thoughts?
i have a $6K trade in and $10K cash to put down on the vehicle, but as there is 0% financing for up to 48mo., i'm wondering if it makes more sense to hold onto the $10K cash and put it elsewhere - while borrowing "free" money.
thoughts?
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Re: 0% Financing on new car (Subaru)...how much to put down upfront?
If it's truly 0% financing (and not in lieu of cash back), then no reason to put down any more than the minimum required.
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Re: 0% Financing on new car (Subaru)...how much to put down upfront?
Are you taking out a 48 month loan? Or will it be longer and the rate will rise?
If 48 month loan - if you can afford the payments, makes sense to not put a lot down. The advantage to putting a lot down might only be discipline-related. If you spend the $10k on something else it won't be there, and you probably won't be able to invest it in 2 years for there to be enough of a difference anyways.
If greater than 48 month, do you know what the rate will go to?
Personally if that $10k was not part of my emergency fund, I would probably put the money down and be done with it. That's not necessarily the most lucrative option, but that's the option that makes sure that $10k goes towards paying down my car and doesn't disappear in the meantime.
If 48 month loan - if you can afford the payments, makes sense to not put a lot down. The advantage to putting a lot down might only be discipline-related. If you spend the $10k on something else it won't be there, and you probably won't be able to invest it in 2 years for there to be enough of a difference anyways.
If greater than 48 month, do you know what the rate will go to?
Personally if that $10k was not part of my emergency fund, I would probably put the money down and be done with it. That's not necessarily the most lucrative option, but that's the option that makes sure that $10k goes towards paying down my car and doesn't disappear in the meantime.
Where the tides of fortune take us, no man can know.
Re: 0% Financing on new car (Subaru)...how much to put down upfront?
+1alfaspider wrote:If it's truly 0% financing (and not in lieu of cash back), then no reason to put down any more than the minimum required.
I'm not a financial professional. Post is info only & not legal advice. No attorney-client relationship exists with reader. Scrutinize my ideas as if you spoke with a guy at a bar. I may be wrong.
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Re: 0% Financing on new car (Subaru)...how much to put down upfront?
I purchased a Subaru a couple years back with a similar deal, 0% on a 48 month loan. I put the most down I could on my CC for points, then nothing else. I used the cash to pay down the principle on my primary residence. 2 things, I could afford the 48 month loan and the interest rate didn't change.
Re: 0% Financing on new car (Subaru)...how much to put down upfront?
This is exactly what we did, 2 months ago, even though we could have paid with cash.jackietreehorn wrote:I purchased a Subaru a couple years back with a similar deal, 0% on a 48 month loan. I put the most down I could on my CC for points, then nothing else.
Last edited by feh on Tue Oct 04, 2016 12:23 pm, edited 1 time in total.
- whodidntante
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Re: 0% Financing on new car (Subaru)...how much to put down upfront?
I've ordered a car and I will put as little as possible down, unless they will let me charge it to a rewards car. There is no reason to pay off a 0% loan.
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Re: 0% Financing on new car (Subaru)...how much to put down upfront?
I bought a new Toyota Sienna 3 years ago (the side door on the old one was falling off around year 9 of ownership) on a "0%" interest promotion.
I realized at the time that the zero percent financing was probably in lieu of a larger upfront purchase price discount. However, although I had enough cash to pay in full, I decided (without doing the math) that I simply didn't have the energy to negotiate a "final" all-cash purchase price and then do the discounted analysis with an assumed interest rate on a non-promotional loan, and just took the zero percent offer. I figured I was probably getting a better deal on the zero percent loan, although I could not be sure. Certainly had I put that money 100% in the stock market at the time (December 2013) I would certainly have come out ahead.
The Money Rat
(EDIT: Forgot to answer OP's question: Once you decide to accept the 0% interest promotion, the only logical thing to do is to put zero down.)
I realized at the time that the zero percent financing was probably in lieu of a larger upfront purchase price discount. However, although I had enough cash to pay in full, I decided (without doing the math) that I simply didn't have the energy to negotiate a "final" all-cash purchase price and then do the discounted analysis with an assumed interest rate on a non-promotional loan, and just took the zero percent offer. I figured I was probably getting a better deal on the zero percent loan, although I could not be sure. Certainly had I put that money 100% in the stock market at the time (December 2013) I would certainly have come out ahead.
The Money Rat
(EDIT: Forgot to answer OP's question: Once you decide to accept the 0% interest promotion, the only logical thing to do is to put zero down.)
Last edited by TheMoneyRat on Tue Oct 04, 2016 1:37 pm, edited 1 time in total.
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Re: 0% Financing on new car (Subaru)...how much to put down upfront?
I would keep the cash on your personal Balance Sheet. If you can afford the monthly payments from a cash flow perspective, there is no need to put a deposit down.
Best.
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Re: 0% Financing on new car (Subaru)...how much to put down upfront?
+1feh wrote:This is exactly what we did, 2 months ago, even though we could have paid with cash.jackietreehorn wrote:I purchased a Subaru a couple years back with a similar deal, 0% on a 48 month loan. I put the most down I could on my CC for points, then nothing else.
I did just that a few weeks ago, that way you earn an instant 2% (assuming that's your default cashback CC) on the amount you put down.
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Re: 0% Financing on new car (Subaru)...how much to put down upfront?
Even with 0%, I think would at least pay the fees & taxes up front rather than rolling them into the loan. I don't like the idea of having the car be "under water" right from the start. Usually I've been able to pay $5k with a CC.
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Re: 0% Financing on new car (Subaru)...how much to put down upfront?
As long as you trust yourself to manage the cash flow, no reason to prepay a 0% loan (aside from credit card points or some similar scheme). If you don't trust yourself, like the idea of the equivalent of more monthly cash flow, or tend to like to split to difference on decisions like this, you could always do something like (1) put the $10k into an online account like Ally and take the arbitrage on the 1% interest rate (small but it's something, (2) put the $10k into CDs timed to mature in 2-3 years so that you an use the proceeds to pay down the loan at the end, (3) put that into a short or medium term bond fund, let it ride for a couple years, then again start drawing from it to make the monthly payments toward the back end of the loan. Just ideas that are probably more geared toward people who like to tinker or micro manage.
I probably wouldn't pay any extra down but would invest that 10k in a long term investment (not one of the options I identified above).
I probably wouldn't pay any extra down but would invest that 10k in a long term investment (not one of the options I identified above).
Pardon typos, I'm probably using my fat thumbs on a tiny phone.
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Re: 0% Financing on new car (Subaru)...how much to put down upfront?
PS good choice with a Subaru
Pardon typos, I'm probably using my fat thumbs on a tiny phone.
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Re: 0% Financing on new car (Subaru)...how much to put down upfront?
fees and taxes would be more than handled via my trade in (~$6k)sunny_socal wrote:Even with 0%, I think would at least pay the fees & taxes up front rather than rolling them into the loan. I don't like the idea of having the car be "under water" right from the start. Usually I've been able to pay $5k with a CC.