[Deucer]

I'm in the market for an '07 Mazda 3, since my 91 RX7 blew all it's water seals today .

I have anough cash to buy the car outright (saved up well for a couple of years), so I wasn't planning on financing, but Mazda USA is offering 1.9% financing, and I'm not one to pass up what looks like free money. I have the money in an ING savings account right now making 4.5% interest, this ends up netting me around 2.5-3% after taxes, so now I figure why not finance about 1/2 the purchase.

Anybody want to chime in on whether this is a good idea or not?

 

[rcrooks]

If you will be approved for the 1.9%, and if you have the capital, I dont see anything really wrong with doing that.

Only thing is Im not sure how financing something of that size affects your credit. If you plan on buying a house or financing something else in the next couple years it might be better to just pay it off now.


4.5-1.9-tax = 1% free interest on around 20k of capital over 3 years (estimates)

If you finance the whole thing over 36 months, thats about 350 dollars of free money when you prorate out the interest and subtract monthly payments from the balance of the capital

 

[Deucer]

[quote author=rcrooks link=topic=71118.msg1248594#msg1248594 date=1173063029]
If you will be approved for the 1.9%, and if you have the capital, I dont see anything really wrong with doing that.

Only thing is Im not sure how financing something of that size affects your credit. If you plan on buying a house or financing something else in the next couple years it might be better to just pay it off now.


4.5-1.9-tax = 1% free interest on around 20k of capital over 3 years (estimates)

If you finance the whole thing over 36 months, thats about 350 dollars of free money when you prorate out the interest and subtract monthly payments from the balance of the capital

[/quote]

Thanks for the reply. It makes sense to me but I just want to make sure I'm not missing anything, this is my first time buying a new car. It's not so much about the 350 dollars, it's also about having the money in my hands, available to me.

Also, I was wondering if I would incur any penalties by paying off early, in case I did want to make a big purchase (like a house). Anybody know?

 

[mattleegee]

I would put down like 20-30% and get the rest financed @ 1.9%

Its always good to have money, i purposely leave debt in 0% credit cards while i have the money to pay it off... just doing payments on it etc... More rewarding that way, because you dont notice little chunks every month compared to $10k BAM and $20k BAM you get it?

Paypal interest rate is @ 5.02% right now, i like to leave money in that BIG PAYOUTS!

 

[rcrooks]

wow... 5% for the money I have sitting in paypal, haha... very nice...

I have a couple G's in there Ive just been too lazy to withdraw, now theyre getting 5%, thanks for the heads up on that

 

[Teeniebean]

Here in Canada, there are no penalties for paying off your financing early, so I would assume it's the same in the US. We hope to pay ours off early!

 

[Deucer]

[quote author=Mattleegee link=topic=71118.msg1248657#msg1248657 date=1173064958]
I would put down like 20-30% and get the rest financed @ 1.9%

Its always good to have money, i purposely leave debt in 0% credit cards while i have the money to pay it off... just doing payments on it etc... More rewarding that way, because you dont notice little chunks every month compared to $10k BAM and $20k BAM you get it?

Paypal interest rate is @ 5.02% right now, i like to leave money in that BIG PAYOUTS!
[/quote]

5.02 is a good rate, but just so you know there are better rates out there and with Paypal there's no FDIC insurance on your money (IIRC), so that's something to consider.

I have stayed with ING because they are easy to use and my money's there already. I"m giving up about 1/2 a percent, but just transfering the money between banks takes time which cuts into gains.

It's smart to leave the money in the paypal account (or any interest bearing savings account) vs paying off debt at 0%. That's basically what I"m trying to do here just with 1.8% v. 4.5% instead of 0% v. 4.5%.

I just wanted to know if there was anything to watch out for, but it seems like I'm looking at things the right way. Thanks gain for the help!

Thanks for all the good comments.

 

[thevelourfog]

I'd just finance the whole thing if it's locked for a period of time unless you're worried about your debt to income ratio for some reason.