Would you buy a new VW if they offered you 0.0% to 2.9% Finance Comparison Rate?

[Sunny43.5]

Okay after all these explanation's I am still non the wiser , probably because every time we have purchased a new car we just go to the bank and arrange a loan or if we have the $$ pay cash . At least with the bank its spelt out in simple plain English , my understanding of the word "comparison is to use it to "judge one against the other . Sorry I am just an old fart living in a world where I seem to be being left behind . Still"" Dazed and Confused ".

[tigger73]

I think the answer is if you're a bad negotiator and you want the best price on a car then you're better off waiting until there is a "deal" being offered by the manufacturer. At least that way you're buying at a discounted price which you haven't had to haggle to get.

Reality is the 0-2.9% finance offers you see bandied about usually have some strings attached - like based on full RRP, excludes fleet and corporate buyers, etc. Essentially it's a discount on the finance to secure your business but of course we all know there's "no free lunch". The discount on the finance is made up for by the fact you're paying full RRP on the vehicle.

To work out if it's a good offer or not you have to crunch the numbers.

Say for example you're looking to buy a $30,000 car and you could get finance from your bank for 8% over 5 years. The total amount payable over the life of the loan works out to be $36,498.

If instead you were to buy the same car but with a 3% finance offer (saving of 5% on the interest rate) you'd only be paying $32,344 over the life of the loan. Which is a nice saving of over $4k.

The real question is what would you have to squeeze the purchase price down to get the same effective cost for the car without the finance offer? The answer to that one is you'd have to buy the same car for $26,586 at the 8% finance to be even (i.e. total repayment including interest of $32,344).

There's a bunch of online finance calculators that will tell you what the repayments and total cost is for the various options you're considering. At the end of the day it depends on how sharp your negotiating skills you have and/or what finance deals you have available to you whether it works out better for you or not.... plus tax considerations however that's another whole rabbit warren in itself.

So crunch the numbers plus look at the terms and conditions on the finance to see if it's a good or bad deal for your circumstances. Sometimes there are "hidden" costs for early termination/additional repayments, etc so you always have to see if it's going to work for you or not.

[Dutch77]

So crunch the numbers plus look at the terms and conditions on the finance to see if it's a good or bad deal for your circumstances. Sometimes there are "hidden" costs for early termination/additional repayments, etc so you always have to see if it's going to work for you or not.

That's a good one to remember for anyone taking out car finance - unless you're doing it via a variable bank loan the interest rate under these finance contracts is usually fixed and therefore will almost certainly be subject to termination fees.

If it's in the banks favour you'll probably just get stung a straight fee, but if it's in your favour (ie paying out a higher interest loan when rates have dropped) then you can face much larger break fees. As one component of the calculation is the value of the loans, car finance isn't too bad in this regard; I've seen break fees run into the hundreds of thousands on early termination of fixed commercial loans.

[tigger73]

I've seen break fees run into the hundreds of thousands on early termination of fixed commercial loans.

Ouch! Some of those finance guys can be real sharks!