Finally decided to pull the trigger and get myself an S2000. Im only planning to get a 05 GPW with 18xxx Miles for $22,550. So far i've only paid full in cash for my previous vehicles. This would be my first loan for a car. My insurance quoted me at 360/month and the loan came out with 9% interest. Should i make a big down payment or should i cash out the S? Its always better to cash it out but it's going to really leave a dent in my account if i do. I was thinking 5 grand on the down payment. So the main question is How much would YOU down if you were buying a $22,550 car.

 

Your insurance is $360 a month? Good lord, that's more than three times what I paid for an S2000 as a 23 year old.

The first piece of financial advice is that if you can't afford the car without credit, you can't really afford the car. The second piece of financial advice is that if you're going to buy the car anyway, it doesn't really matter what you put down -- it won't improve your interest rate or anything else. What matters is how fast you can pay it off. Even if you get a five-year loan, you should try to pay it off as fast as you reasonably can. Make some balloon payments when your bank account balance permits.

- Warren

 

Most car loans nowadays have the interest already accumulated in the pay off so if you pay it off early, there is no savings so it's just better to do the monthly payments.

I have this on my toyota and parents had it on their mercedes.

 

These may be new products with a specific penalty or fee.

However, every car loan I have ever had did not have a 'balloon' interest payment if paid off early. I cannot see how the bank (or finance company) can charge you beyond the principal and term outstanding.

You may want to confirm with your lender.

Michael

 

Your question is a little difficult to answer definitively. Kind of like, what would you suggest, coke or x?

Make as big down payment as you can if you want to spend as little money as possible on the car [as most would]. Whether you make a big downpayment or not does* matter even if the interest rate is the same, as the principle will be smaller. Given your insurance payments, 9% might be the best interest rate that you can get, have you tried a credit union?

I know I'd like to have an extra 20k earning 9% interest, I'd proportionally NOT like to have to pay 9% on it. I personally couldn't throw money away like that.

If you can make a sizeable downpayment, why not buy an 02-03? It's basically the same car [I like them better than AP2's] and you won't have to go in debt as deep. AP2's depreciate much faster as well.

 

It's the rule of 78's, in which finance companies can accelerate their interest accruals on consumer finance loans.

Fortunately, my credit union doesn't employ that trick, and I never would borrow money on any contract that contained such a provision. Best bet is to read the loan agreeement, and don't sign if it contains it.

Super high insurance rates and 9% interest would quickly take much of the fun of ownership out of an S2000. I'd pass until your insurability improves. Paying 9% on a car loan is silly - you'd have to be able to make double digit risk free returns in the market to make it worthy of further consideration.

 

If you can pay it off then I'd suggest you do so. To be honest that insurance is waaay too high. Even when I bought my car at 23 (two years ago), having financed 75% of it (big mistake) my insurance and payments only totaled $450/month, just $60 more then you'd be paying just for insurance. I'd start looking for a new insurance company, then maybe an older S, 2004 if you like ap2 specifically, any year with low mileage ap1. If you still aren't comfortable paying out of pocket, then wait a few months and save up the money you'd be paying towards the car (which would have to be >$500 with that insurance).

Also have you tried dealing with them yet? Whether you pay cash in hand or finance you can knock some off (dealerships get commission on finance loans).

Anyway best of luck, and be patient.

 

You should put down as much as you can comfortably afford to. You don't want to be car rich and cash poor. You still need to be able to make the payments. Be realistic and don't become so obsessed with it. Do what's financially comfortable for you. I don't however think you should reduce your down stroke to invest the money. That's asinine considering you are going to need to make 9% on it just to break even.

It's a lot more about doing what you can manage easily and comfortably so that the purchase enhances your lifestyle, not ruins it, and less about trying to cheat that to save a little money.

 

Good point, also realize you'd need to make 11% to break even after taxes and that's if you hold it for a year, more realistically it would be 15%<

 

thanks for the great advice, getting deployed in a couple of months so i guess im just going to wait off on purchasing the vehicle. Hopefully when i get back my insurance would be cheaper and i'll have more money in the bank. Once again thanks for the great advice.