discount for financing car

[Colleenz]

I need some help from some loan savvy people.

I am purchasing a car and have a negotiated price. I have cash to buy it. The dealer offered me $100 off if I finance through his preferred bank (2.49% / 48 months).

Can I take the deal and pay off the loan the same (or next) day? Will I owe any interest? If there are more questions I need to ask please let me know.

Thank you! ;D

[Deleted]

I would say do it but try to get more than $100 out of it; I would no go thru the hassle for only $100 because you might pay that in fees alone.

Maybe I am different but the remaining balance on my car note is lower than if I were to send in a check and pay it today.

But Phil and others that believes in making your money work for you would say since it such a low interest to take the deal; invest your money in the market and keep the loan for the full 48 months.

[iono1]

You have to read the contract to see if there is any prepayment penalty. In the most severe contracts, you can owe the total sum of the payments no matter when you pay it off.
The other problem is that it may take a period of time between the day the loan begins and when the bank has all the paperwork finalized so that they can process a loan payment. You'll have to pay interest up to the point that the payment can be processed. You may be able to pay it off in a week or more, but probably not the 1st day.
Is it really worth $100 to even bother taking out the loan?

[zibazinski]

I wouldn't do it for a hundred bucks. The autodealer is making hundreds off you by you doing this. READ the contract CAREFULLY and then let someone else read it as well.

[phil5185]

But Phil and others that believes in making your money work for you would say since it such a low interest to take the deal; invest your money in the market and keep the loan for the full 48 months.

Exactly, I would take the deal, put my own money in my SP500 fund for the entire 4 yrs - I never prepay 2.5% loans. But I would not take the deal just for the $100.

The loan will cost $10,520 for each $10k. If the SP500 averages 11%/yr (historical average) the $10,000 would grow to $15,180 in 4 yrs. In practice, it will be either more or less - somewhere between $10,000 and $20,000?

[hoops902]

"Can I take the deal and pay off the loan the same (or next) day?"

This depends entirely on what your loan documents say. You CAN pay it off, but it might penalize you for doing so. No one here will really be able to tell you without having read the loan document.