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Trying to figure out the best numbers for the car loan.

Discussion in 'Off Topic' started by timk225, May 9, 2016.

  1. timk225

    timk225 Member

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    For my upcoming Model 3 purchase, I'm trying to figure out what would be the best deal for me.

    So I was on a car loan calculator website and figured the cost for some numbers. I plan to get a base Model 3, maybe with the big battery. I probably won't get the D, and I don't plan on getting any other fancy options.

    My credit score should be right around 700, and I got a 6% interest loan on my '11 Challenger R/T when I bought it in March '15, but then again that was a used car compared to a new car here. Never been late on a payment for that one, or my previous car loan, so I should have a good payment history for that.

    So for 35000, 39000, and 43000 loan amount, and 6% interest, figured for 60 and 72 months, here's what I got:

    60 months: 35K, 677 payment, 5599 in total interest.
    60 months: 39K, 754 payment, 6239 in total interest.
    60 months: 43K, 831 payment, 6878 in total interest.

    72 months: 35K, 580 payment, 6763 in total interest.
    72 months: 39K, 646 payment, 7536 in total interest.
    72 months: 43K, 712 payment, 8309 in total interest.

    If I got the big battery, plus the fees and delivery and sales tax and gap insurance, I'll likely be in the 39-43 range for total loan amount being financed.

    I kind of wanted to go with a 60 month loan to minimize the interest I pay, but it seems like if I go with 72 months, my monthly payment will be smaller by an amount, that when multiplied over 72 months, means I pay less in payments than what I pay more in interest.

    Yes, I'll get a tax credit, and I plan to apply it to the payments, but for now, I'm not assuming that extra money into the calculations.

    Any suggestions?
     
  2. Tex EV

    Tex EV Member

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    700 puts you at "good" credit, which should allow you to get better rates than 6% on a new vehicle loan. I'd be looking for 3% or better.

    The tax credit comes at tax time and thus can't be directly factored into the loan. You could do it indirectly by putting $7,500 down when buying the car and then getting it back when filing taxes.

    60 vs 72 months is a personal decision, but from a financial standpoint it makes the most sense to minimize interest paid, especially at a higher %. 72 months makes more sense when you have a low % and can save/invest the difference monthly.

    Lastly, get the configuration you want and don't look back! Compromises will cost you more in the long run - e.g. paying full price for the base model then trading up to a larger battery after a few years.
     
  3. Unbeliever

    Unbeliever Member

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    Get thee to a Credit Union. Mine, for example, has rates in the 1.5% to 2.0% range if you've set up auto-transfer from your main account, and 1% more if you don't.
     
  4. James Anders

    James Anders Member

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  5. heysteveh

    heysteveh Member

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    So in your example you figured 6% interest for both 60 and 72 months. First of all as others have mentioned you may be able to get a much better rate. Either way, why do people sometimes take the longer term if they know they will ultimately have to pay more total money in interest? It is usually because they are stretching to get the car and they are worried about the shorter term/higher payment making their budget a little to tight. So here is a strategy used by many. Take the longer 72 month term to get the lower payment. Then set up your payments so that you are paying the same monthly payment required for the 60 month term (i.e. you are paying extra each month). That way if you ever run into trouble with your budget you can go back to making the lower payment. This is a great safety net to have in case life throws something at you unexpectedly. Some will argue that if your budget is that tight then you shouldn't buy the car. But isn't that the whole point of most car loans in the first place? We take out the loan because we can't afford to pay cash for the car. So we try to combine the shortest term and best interest rate with a monthly payment we think will work for our budget. In my opinion, if I was offered a 12 month term and a 84 month term with the same interest rate, I would take the 84 month term every time and then try to pay it off in 12 months (or as quickly as possible given my budget). Why? Because you never know what life will throw at you that could make you need to take 84 months to pay it off.
     
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  6. timk225

    timk225 Member

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    I used 6% interest in my example because that was what I got for a rate when I got my R/T . My rate for buying a new car could very well be lower, I just wanted to figure the numbers for the worst case scenario, and if it works out that I can get a lower rate, then all the better.

    I recalculated the numbers for 2.5% interest, and it was a significant reduction. the $43K loan over 6 years saved $58 per month on the payment, and nearly $5000 in interest over the loan term.

    When the time comes to order my 3, I'll go talk to some credit unions and see what kind of deal they can give me.
     
  7. adiggs

    adiggs Active Member

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    Another tip - using S and X as historical examples, there will be threads in the Model 3 forum with information about deals people are finding for financing and insurance (and detailing, and anything else you can think of related to purchasing a new car). For more real time information, look for those threads at the time.

    As was mentioned upthread, I learned about Penfed from a Model S thread. That got me into a 1.49% loan for my used Roadster that I wouldn't of known about otherwise.
     
  8. timk225

    timk225 Member

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    I'm a veteran, I wonder if I can get a better loan deal through the VA.
     
  9. SageBrush

    SageBrush Active Member

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    #9 SageBrush, May 11, 2016
    Last edited: May 11, 2016
    ?

    A loan has two components: Premium (P) + Interest (I)
    For example, a $40k car = the Premium, and that number does not change by loan arrangement. The interest total will increase if the rate is higher or the loan term is longer.
    Derogatory credit information is not filtered by purchase.
     
  10. timk225

    timk225 Member

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    I've been watching my credit history for the past three years or so, all the negative stuff has timed out by going over the 7 year mark. Good credit history now! :)

    And I think it is the principle, not the premium.
     
  11. SageBrush

    SageBrush Active Member

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    Right you are, sorry for the typo

    A credit score of ~ 700 implies some derogatories are still in the mix.
     

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