Monday, July 18, 2005

The Real Cost of 0% Car Financing...

0% interest car loans may seem like a great deal but, make sure you compare it to other discounts and incentives that the dealer may offer.

Dealer discounts that can take up to several thousand dollars off the price of a new vehicle, may in fact be a better deal.

When comparing a $25,000 vehicle that is eligible for a $2,000 in dealer incentives, it may be useful to look at the discount as the interest price charged for the 0% interest plan. Essentially, the value of the incentive program is the interest cost for the 0% financing offer.

So, assuming you have the money sitting in the bank generating 2.4% interest, the inflation rate is running at roughly 2.1%. Essentially, your money will grow at 0.3% if you take part in a 0% offer you will generate approximately $153.00

Now, if you have the cash on hand and opt for the $2,000.00 discount, you will get an 8% return on your purchase, netting out at a 7.7% return.

Calculate your own interest savings at


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