Tesla ideal Finance Term length

[Lesterc]

Hello
I am fairly new to car financing and such and i have scheduled an appointment to speak with an advisor however i figured ill ask here if maybe other more savvy members can share from experience on tips and tricks.

I live in Canada and these are the terms and rate that i know about:
48month - 3.3%
72month - 3.25%
96month - 3.6%

i plan to probably upgrade/tradein in about 4 years as i figure a better version might be out by then. So i probably need to cut most of the terms premature.

i know i can just purchase the car out in full but thats not really a good option.
I know the best plan should be shortest possible term however the super high monthly payments is not great.
I also know some people would say pick the 72month term and would fo extra payments on top to lower the premium and potentially pay off the car and less interest sooner without the pressure of a higher predetermined set amount.

Anyone can offer some advice?

 

[OCR1]

I think you asked and answered your own question. From best to worst:

1) Pay cash if you can
2) Take a 48 month loan if you can afford it
3) Take a longer loan and pay it off sooner if you are able.

 

[ofcorona]

The shorter the loan, interest is lower but payments are higher.
If you have the option to pay in full, why not put a 20-30% or depending what is comfortable for you really.
I suggest the shorter loan because you pay less interest over time.

 

[Booma]

What would you do with the money you're not applying toward your down payment or monthly payment? That is the most significant factor. If that money is going to work for you in the market or some other productive means, then it makes sense to finance over a longer term. If you're planning to use the extra cash for more consumption it is probably not the most efficient financial option.

 

[Gize]

I saved for a couple years so I could put down a significant down payment and not get ulcers when seeing what I am paying monthly for a car. (well, first year I thought I was saving for a Tacoma down payment, but don't tell anyone).

I went with your last option, longer term, but already have auto-pay set up to start sending more than the minimum to shave a couple years off the loan and interest. If times get tight I don't have to do that and I still keep my car. Wish I could have gone with the cash option but I am not at that point in my life. But who's complaining, I've got a Tesla (well actually the detailer does, but I am cracking a beer if she's ready by Sunday!)

 

[ElectricIAC]

Hello
I am fairly new to car financing and such and i have scheduled an appointment to speak with an advisor however i figured ill ask here if maybe other more savvy members can share from experience on tips and tricks.

I live in Canada and these are the terms and rate that i know about:
48month - 3.3%
72month - 3.25%
96month - 3.6%

i plan to probably upgrade/tradein in about 4 years as i figure a better version might be out by then. So i probably need to cut most of the terms premature.

i know i can just purchase the car out in full but thats not really a good option.
I know the best plan should be shortest possible term however the super high monthly payments is not great.
I also know some people would say pick the 72month term and would fo extra payments on top to lower the premium and potentially pay off the car and less interest sooner without the pressure of a higher predetermined set amount.

Anyone can offer some advice?

With most cars I’d say 48 is as high as you should go (and if it leases well, forget buying) but with the Model 3 it seems like the depreciation curve favors 60+ just as well. I went with 72 because the APR was the same as going 48. I may pay more interest over the life of the loan cumulatively but if the music stops and I should find myself with less income then usual I can still swing the payments easily.

 

[hexxys]

1) Pay cash if you can
2) Take a 48 month loan if you can afford it
3) Take a longer loan and pay it off sooner if you are able.

If you have the cash and you qualify for a low rate, it's a mathematical certainty that you're leaving money on the table by not just investing it and just making monthly payments on the car instead. It doesn't even have to be a particularly risky/high yield investment either. Naturally, this requires discipline and not everyone has that. But yeah.

OP's rate on the 72 month term is actually marginally lower than the 48 month term. I don't understand the rationale behind taking the shorter term? You can pay off the 72 month loan early but you can't make the payments lower on the 48 month, should that ever become necessary. It's just a more flexible arrangement IMO, and cheaper too if you decide to pay it off in 48 months or less anyway.

 

[Tremaine]

Totally agree with above... Interest rates are so low right now, that it seems like it would be better to take the longer loan and have more flexibility with your money. Even a modest investment with the cash will pay the interest on the loans.

 

[Mr. Burrito]

If you need 72, 84 or 96, find a cheaper car - you can’t afford it

 

[Knightshade]

If you need 72, 84 or 96, find a cheaper car - you can’t afford it

Again depends on the rates.

Back when I was buying mine you could get rates right around 2% (some even cheaper though usually only in a few states).

I'll take as much as anybody wants to give me, as long as they want to give it to me, at that rate... I get basically an entirely free loan with the depreciation of inflation on future money\

And that's without the gains available by investing it elsewhere at even pretty conservative returns.

 

[Mr. Burrito]

Again depends on the rates.

Back when I was buying mine you could get rates right around 2% (some even cheaper though usually only in a few states).

I'll take as much as anybody wants to give me, as long as they want to give it to me, at that rate... I get basically an entirely free loan with the depreciation of inflation on future money\

And that's without the gains available by investing it elsewhere at even pretty conservative returns.

The key distinction here is if you can only afford the payment if it is via these ultra long term car loans then it is too much car for you not that you could afford a shorter term but choose to go longer because you’re getting a favorable rate. People who rely on these crazy long terms likely don’t have cash to invest anyway and may barely be able to handle the down payment.

 

[ftmaybe]

What would you do with the money you're not applying toward your down payment or monthly payment? That is the most significant factor. If that money is going to work for you in the market or some other productive means, then it makes sense to finance over a longer term. If you're planning to use the extra cash for more consumption it is probably not the most efficient financial option.

Yup, yup.

96mo @ 3.6% ?? Nice. I can easily make 3.6% in 3-5 mos through covered options contracts, making the financing free. Lower payments = more money diverted to investing.

Beyond tinkering with the market directly: in the US if dragging loan terms out allows you to put more toward a 401k, not only do you get market returns that will likely exceed your loan rate, but you also will likely get an employer match *and* tax savings (I get a 50% match and am in a 32% bracket, every dollar makes a huge difference for me). This should soundly trump interest costs. May or may not be a consideration on this forum, most people here seem to be pretty well heeled .. but almost all the people I know personally struggle to fully fund their retirement accounts (if at all), so.... you never know.

 

[Posti101]

I also went with 72 months 3.25% located in Canada. I chose 72 since the monthly payments were reasonable with a 25% sos payment on the principe. Also since I can pay the car off whenever it makes complete sense to take a longer term payment since it’s a open loan. Lots can change in 2-3 years so take a lower monthly payment for flexibility and if it changes for the better you can always pay off whenever you feel like it and save on internet.

 

[GenralSpecific]

I also went with 72 months 3.25% located in Canada. I chose 72 since the monthly payments were reasonable with a 25% sos payment on the principe. Also since I can pay the car off whenever it makes complete sense to take a longer term payment since it’s a open loan. Lots can change in 2-3 years so take a lower monthly payment for flexibility and if it changes for the better you can always pay off whenever you feel like it and save on internet.

Same here. My rate ended up at 3.39%. I could have done a shorter term but I decided I’d rather use the money more profitable elsewhere.