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Saab buys deep....0% vs incentives
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Posted by Mike Lynch [Email] (#81) [Profile/Gallery] (more from Mike Lynch) on Wed, 12 May 2004 15:06:09 Share Post by Email
In Reply to: 0.0% for 60 months question, JB, Wed, 12 May 2004 06:57:00
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Which is loan lingo that means it's not all that difficult to qualify for the 0%. Same with the subvented Saab leases, Saab buys deep which means Saab Financial isn't just looking at your credit score to try and exclude you. They are looking at the big picture, primarily how you've handled your previous auto loans, and not how you've fared with the tax man, medical collection agencies and other credit score killers. Even with a previous bankruptcy if you pay your autos on time, Saab will usually do you at 0% or the killer lease.

As for 0% or the incentive, here are some general guidelines. Have you dealer quote it both ways and see which payment is lower. There's $3k or 0% for 9-3's and $5k or 0% for 9-5's. The less you put down and the more you finance the closer the 0% comes to being a consideration.

In all cases, unless the 0% payment is significantly less, conventional financing has advantages. Say the payments are the same for 0%, and 60 months at 5%, that means that the $3k incentive is offset by a $3k finance charge so that the total of the payments is the same. The 5% loan starts out with a $3k lower balance owed, so $30,000 financed at 0% for 60 months is a $500 payment. $27,000 loan at 60 months at 5% is a $509 payment. If for some reason you ever pay off the loan early, a 0% loan is at a $3,000 disadvantage to start, and proportionately less as the term progresses. The conventional loan with the slightly higher payment has a $3,000 lower balance. In sum the 0% loan would only be better if you did indeed keep the loan for the entire term, no early payoff or trade as there is no potential interest refund on a 0% loan.

So get it quoted both ways. If it's close take the incentive and pay the rate. You'll be ahead significantly unless the loan goes full term. And if you're putting anything significant down payment wise the non 0% will be a lower payment, particularly with the more generous 9-5 incentive.

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