One of the most common promotions offered to consumers when purchasing a new vehicle is 0 % financing. In simple terms, this allows the buyer to borrow the full amount for the purchase of the vehicle without paying interest.
So if the vehicle costs $ 30,000 and that you finance at 0 % for 60 months, you will pay $ 500 per month. This is very advantageous, and normally we would recommend this option if there were no other alternatives, but it we must remember that manufacturers often offer other promotions, for example, a cash discount when we pay for the vehicle upfront.
So, this same vehicle that costs $ 30,000 may be offered with a discount of $ 3,000 if you pay cash. If that is the case, you could take out $ 27,000 from your account, or you could borrow $ 27,000 at the bank and even if there is an interest on this loan, it could still bring the total amount to less than 30 000$. Another situation to consider is that if you keep the $ 27,000 in your account and invest it, you could perhaps earn more than $ 3,000 in return. What then?
“We must calculate the total amount of each alternative. If you must borrow, calculate how much you paid after 60 months including the interests on the loan, and compare that amount with the total amount paid when you finance at 0 %. If you have an investment opportunity, calculate how much you will earn after 60 months and compare, again, to the amount you must pay by financing with an interest-free loan,” explains a sales representative at Morrey Infiniti.
Regardless of whether you pay cash or finance at 0 %, you will be getting a good deal. The important thing is to figure which deal gives you the best return.