Author Topic: Property and car expenses  (Read 204 times)

ABCD

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Property and car expenses
« on: October 07, 2017, 03:12:46 PM »
I am going to buy a car and some land. The car will be about 15k, and the land will be about 55. I have $46k in savings for this. I will be able to pay another 3k/month toward financing.

Aside from the basic math of differences in interest rates, what else should I consider when looking at financing the car vs. paying it in full, or throwing all the money at the loan for the land, or splitting it? For example, I know sometimes car financing contracts charge a penalty if you want to pay it off early, so I want to look out for that. What else should I consider?


secondcor521

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Re: Property and car expenses
« Reply #1 on: October 07, 2017, 05:57:22 PM »
Car loans used to have that.(*)  Nowadays they often use simple interest if you're financing through one of the big automakers' financing arms like GMAC, so the penalties probably aren't there for early payoff.

There are costs associated with loans, so you'd want to figure those in - origination fees, loan fees, credit checks.  Based on this, it will probably make more sense to buy one outright and partially finance the other.

If you have a car loan, you'll be required to carry comprehensive and collision insurance.  You may want that coverage anyway, but if you don't, it's an added cost to having a car loan.

(*) Actually what I think they used was the rule of 78, which was a way to have a higher proportion of your earlier payments go to interest than a simple interest calculation would be.  They would frontload the interest so even if you paid it off early, they got more interest than they otherwise would.
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