New Tesla / Wells Fargo Finance/Lease Program offered me 6.45% - 60 mo. with Resale

[AprilDelivery??]

New Tesla / Wells Fargo Finance/Lease Program offered me 6.45% - 60 mo. with Tesla Resale Value Guarantee and with the big down payment that Elon subtracts the Fed. tax credit with . I have lousy credit cause I messed it up 3 years ago so thats why the high interest rate plus I am leasing another car which is due in a year or so. But do you think it is worth it? My bank wouldn't even give me auto finance loan for lesser loan amount. My calculation the interest comes out to 3,560 over the term of 60 mo. loan but I could return it after 36 months to Tesla with a residual value of 28k.

 

[K Hall]

That is a good deal for poor credit. Gives you an opportunity to rebuild your credit as well. You can refinance at anytime with no penalty if your score improves.

 

[spatterso911]

... but I could return it after 36 months to Tesla with a residual value of 28k.

Residual value on what?? What are the specs of the MS you are trying to purchase??

 

[Tesla 940]

Not to me!

But do you think it is worth it?

I would try to do without the car, or any other car for that matter, and work on rebuilding my credit rating. 6+% interest rate - bend over! Sounds like you need to get your personal financial house put in order - not purchasing an expensive toy.

 

[AprilDelivery??]

Better to buy it . With this hefty down payment and high interest rate. I don't know if its worth it. The only good thing is the Tesla Resale Value Guarantee and get a residual value of 28k.

 

[deonb]

Better to buy it . With this hefty down payment and high interest rate. I don't know if its worth it. The only good thing is the Tesla Resale Value Guarantee and get a residual value of 28k.

So I don't know if your regressions 3 years ago was ongoing or a one-off event (like divorce). Let's assume it's a one-off thing and you can comfortably afford the car now.

So you can either:
a) Wait 4 years for those events to be written off, at which point you'll have mediocre credit since you don't have a significant credit history.
b) Get a $60'000 loan now and pay off e.g. $40'000 over the next 4 years, giving you a 1/3 credit utilization, which will score as good/excellent at that point.

So it will cost you more in interest now, but you'll be left with a better credit score. (At which point, if you e.g. refinance your mortgage the extra $3000 you paid over the 4 years could easily be made up in a few months. Provided interest rates stay the same etc. etc.).

Also 6.45% isn't a horrific interest rate. A decade or so ago that was the best you could do even with excellent credit.

Of course, make sure you can actually afford it. Defaulting on a Model S loan will put you in a MUCH bigger hole. You can't just stop drinking coffee to make up those payments!

 

[AprilDelivery??]

I could afford the car now. But I'm wondering maybe like everybody says to get the auto loan and build up my credit or some say that if I can afford it, don't pay the high interest rate but I may not want to keep it after three years , maybe get a better electric car with better range?

 

[smd]

I could afford the car now. But I'm wondering maybe like everybody says to get the auto loan and build up my credit or some say that if I can afford it, don't pay the high interest rate but I may not want to keep it after three years , maybe get a better electric car with better range?

If you can afford the car now, it sounds like you have cash on hand for a full purchase. Why not take the 6.49% loan for a relatively small amount, like $20k and make payments on it to build your credit. Invest the $20k in TSLA and I bet it will return more than 6.49% annually.

 

[Trnsl8r]

I could afford the car now. But I'm wondering maybe like everybody says to get the auto loan and build up my credit or some say that if I can afford it, don't pay the high interest rate but I may not want to keep it after three years , maybe get a better electric car with better range?

Just buy the damn thing then. Or don't buy it and wait for the next big thing (there will always be one). But I wouldn't pay that interest for anything less than vital surgery without a gun to my head.

 

[metafor]

If you don't mind my asking, how poor is poor credit? I'm pondering the "lease" myself vs the loan and was wondering how good the rate would be that I'd get.

 

[ElSupreme]

Holy cow. Five or six years ago that would be a pretty good interest rate. I would eat the cost and help build back your credit. Assuming there isn't a systemic problem still going on obviously. I assume you have your credit problem fixed, considering your are purchasing this car.

Considering your local bank wouldn't give you a loan this seems like a cheap way to build credit.

 

[Citizen-T]

Agree that you can beat that interest rate via investing, though dumping it all in TSLA is probably not the way to go. That way you could build your credit and offset the cost of doing it with a big juicy dividend. All depends on the specifics of your situation though, so you need to make the call.

 

[AprilDelivery??]

I'm thinking more in line in purchasing now because the stock market was up to the highest its been in the last 5 years so I sold off some retirement mutual funds at the high . So I'll take advantage of the $7,500 Federal Tax Credit because I have large gain on the mutual funds and that will offset the large gain. Therefore from a tax prospective its better to buy it outright . What do you think? Because I'll just be paying interest to Tesla/Wells Fargo. Since I already have two credit cards and I have be paying them off every month in full that will build up my credit enough over the next four years. Plus I have a car lease for another year or so and paying that builds up a lot of credit. In addition, I have had four leases over the last 13 years and I don't like to pay monthly payments every month because I might be taking out a Home Mortgage in the next few years and 50k auto loan will not help me if they see I am paying a lot money a month for that.

 

[metafor]

IIRC, credit is based on age of the account as well as status (late, failed to pay, etc). So having multiple leases really doesn't help much. In general, car loans don't help your credit all that much due to the fact that they're normally very short in length -- 3-5 years.

That being said, if you can take a small loan (say 10-20k) and stretch it out to over 6 years, that would help your credit.

 

[AprilDelivery??]

I currently have a car lease for 13k over 3 years so thats good. In fact thats probably the only thing thats helping my credit now ! So from a Tax prospective I have to been under a certain tax bracket and its advisable to outright purchase the car so I'll be under this tax bracket. What do you think?

 

[Doug Martoccia]

If you expect your credit score to improve in a year or two, you can buy now and potentially refi later at a lower rate. Of course, interest rates are really low right now and could go up.