Vehicle Financing: 0% vs Traditional Finance with Rebates.

American’s love 0%. My friends love it.  I love it.  But I can’t really negotiate my deals at Best Buy like I can buying a car. (Nothing I buy at Best Buy is going to not warrant 0%). But buying a car is different. Should you take 0%?  Why wouldn’t you?

Here is a great calculator: Interest Rate Calculator

So let’s say you have a vehicle you want to buy. Let me give you an example of 0% or taking a rebate from the manufacturer and traditional financing. (This scenario assumes you have good credit and don’t want to put any money down.  Also you will be paying taxes as if living in Missouri.  In which you pay taxes on the price paid.)

Let’s say you want to buy a $20,000 vehicle.  And the store you visit (in Missouri) is offering 0% for 60 months.  You really want the 0%, but also want to make sure you don’t pay lots in taxes, you have to pay taxes. (The less money you buy the car for, the less your taxes are).

With $0 down and at 0% for 60 Months (most manufacturers now have you pay full MSRP give you a rebate or 0%….trucks sometimes give you both). If it’s not a National Ad, the store will buy that rate down to 0% from XX% which costs money. So: $20,000 divided by 60 = $333.33 and the taxes you pay (living in Jefferson City, in the city limits) are 7.725%

MO Sales Tax Calculator

Your taxes on said $20,000 vehicle are $1,545 so after taxes you pay $21,545 (TAXES ARE NOT NEGOTIABLE, YOU HAVE TO PAY THEM). Now, let’s say the vehicle you want to buy is offering a $1,500 rebate and for 60 months you can get an interest rate of 2.99%

The vehicle price is $20,000 Minus $1500 in rebates so your purchase price is: $18,500 (Taxes are $1,429.13) in this scenario your payments are $323.35 (your total cost including interest paid is: $19,401 + $1,429.13 = $20,830

So paying interest, actually saves you: $714.87 ($599 discount plus interest paid + $115.87 tax savings)

So, that’s that.  0% doesn’t win that time.  Do your research, educate yourself and if you want a great experience, look me up and get it Straight From Nate. #SFN

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