[vladinecko]

Originally Posted by John 070

if a person missed the boat by a day and paid 4.9% instead of 3.9%, I don't think saying pay an extra $200/mo and you'll be ok is gonna exactly cheer them up.

exactly! thank you!

[Payroll]

Originally Posted by anmcguire

A simple solution if you can afford it... Pay a little extra each month so the principle is payed down faster, thereby avoiding the interest. I could put together an amortization spreadsheet to determine how much extra per month you would have to pay to offset the point if you like. Here is an example with a $50,000 loan financed for 60 months.


Rate Total Paid Payment Total Interest
2.00% 52,583.40 876.39 2,583.40
3.00% 53,905.80 898.43 3,905.80
4.00% 55,249.80 920.83 5,249.80
5.00% 56,613.60 943.56 6,613.60
6.00% 57,998.40 966.64 7,998.40
7.00% 59,403.60 990.06 9,403.60
8.00% 60,829.20 1,013.82 10,829.20
9.00% 62,275.20 1,037.92 12,275.20
10.00% 63,741.00 1,062.35 13,741.00


So the difference is about $1400 or roughly $24/month. If you paid off the loan in 4 years instead of 5, you would not pay the $1400 extra. Again, this is assuming that paying an extra $200 dollars a month (in my scenario) is possible. Hope this helps, take care.


Andrew

This analysis ignores the opportunity cost of capital - the outlets you have to invest the money you are using to prepay the loan. In other words, paying off the loan early to avoid interest does not solve the problem. If one had the liquidity to pay off the entire loan, one could avoid all of the interest, but that doesn't solve the problem.

Bottom line is that it's too bad they hadn't offered it sooner, but such is life.

[EINSER M]

same thing happened to me, financed @ 4.9% and saw the rate drop to 3.9%, wrote a letter to BMW FS to argue my loyalty (past and future) and we will see what they say. I've financed and leased 13 BMWs through them in the last 8 years, I'd hope they credit my account for the difference in interest, but if they dont thats ok, like a poster said here, i still got a great deal at 4.9% but not sure i'd finance with them again in the future...

[John 070]

Originally Posted by Payroll

This analysis ignores the opportunity cost of capital - the outlets you have to invest the money you are using to prepay the loan. In other words, paying off the loan early to avoid interest does not solve the problem. If one had the liquidity to pay off the entire loan, one could avoid all of the interest, but that doesn't solve the problem.

Bottom line is that it's too bad they hadn't offered it sooner, but such is life.

What you say is absolutely true. Basically, it's like saying the price dropped $700 (that's my interest calc. for 25k borrowed) over the 5 year duration of the loan, on March 1, and a person bought Feb. 29. They missed an incentive as a result. No matter what they try to do, i.e. pay the loan off early, etc., in the end they paid more for the vehicle than if they got it on March 1. The person at 3.9% can also pay off early, so they're still better off than the 4.9% person.

Keep in mind, even 3.9% is higher than what is typically earned in an internet savings acct., so it's no longer that simple to earn more in a savings acct., than on a loan.

So whatever the 4.9 person can fanagle, it's not the same and the opportunity cost of further decisions must be considered. I say for the 4.9'ers, forget about it, it's done. You'll drive yourself crazy unnecessarily.

And again, there's nothing wrong at all about paying off a loan early, nothing. It doesn't maximize return in most cases, but at the same time, not having debt is a relief i.e. "feel good" move.

[user1]

Originally Posted by John 070

What you say is absolutely true. Basically, it's like saying the price dropped $700 (that's my interest calc. for 25k borrowed) over the 5 year duration of the loan, on March 1, and a person bought Feb. 29. They missed an incentive as a result. No matter what they try to do, i.e. pay the loan off early, etc., in the end they paid more for the vehicle than if they got it on March 1. The person at 3.9% can also pay off early, so they're still better off than the 4.9% person.

Keep in mind, even 3.9% is higher than what is typically earned in an internet savings acct., so it's no longer that simple to earn more in a savings acct., than on a loan.

So whatever the 4.9 person can fanagle, it's not the same and the opportunity cost of further decisions must be considered. I say for the 4.9'ers, forget about it, it's done. You'll drive yourself crazy unnecessarily.

And again, there's nothing wrong at all about paying off a loan early, nothing. It doesn't maximize return in most cases, but at the same time, not having debt is a relief i.e. "feel good" move.

I agree. I'm posting a comment made recently about a buddy that thought he could make more financing a car and because of the bad economy he would have been better off buying the car. This isn't true for everyone but many believe they are Warren Buffet when it comes to investing, fooling themselves with inaccurate percentages, when in reality they aren't even close.

My idiot friend leased a Mercedes and put the difference in the market back in October. Hes down more than 15% - about the same as the DJIA. On track to loose more in the market than he would have in depreciation. Plus he doesn't own a business so none of the payments are a write off. If the market doesn't get a good rebound (18% just to break even) he will end his lease loosing a lot more than if he bought, used the car then resold the car. Even the best intended plans dont always work out in unstable economic times.

If your true yield is less than the loan then there is nothing wrong in paying off a loan early instead of letting it tank in the market (if that was the plan).

[halfpast3]

Question...if you paid $3.59 a gallon for gas at Chevron today and saw the same station selling it for $3.39 a gallon the next day would you ask for your money back? I know some of you are gonna think thats smart ass or insignificant but really, whats the difference?

[tturedraider]

Originally Posted by 2007_E93

If it makes you guys feel any better,... I financed a purchase at 6.25% and that was the absolute best rate anywhere for the 335 convertible when I bought it in July 2007. I have a spotless credit history.

2007_E93 - If you're interested you could refinance with Pentagon Federal CU - https://www.penfed.org/productsAndRa...dAutoLoans.asp . Anyone can join - https://www.penfed.org/howToJoin/overview.asp

Originally Posted by Payroll

Unless you can somehow convince BMWNA to give you the 3.9%, refinancing with a third-party lender will not lower your rate.

Risk-free treasury bonds are paying around 5% right now. No matter what your credit score is, you are riskier than lending to the US government (at least in theory). If people are lending to the US government for 5%+, depending on term of the loan, they're not going to lend to a riskier borrower for less interest. The only reason BMW NA can offer those rates is because they are incentivizing you to buy the car. The reason I bought the car was because I found the 4.9% attractive (I bought it less than 2 months ago so I share your pain).

Not sure about how it would affect your credit score.

Originally Posted by John 070

I think there is a lot of naivety on this forum. In general, one cannot usually buy at the lowest, sell at the highest. Usually things happen in-between. Granted, one doesn't usually happen to make a deal just before the situation does a 180 towards the favorable, either.

Don't get me wrong, I know what it feels like to play the coulda shoulda woulda. I daytraded BlackBerry stock in early Oct., and patted myself on the back for making 5/share in a matter of hours. Got out at 103, only to see it go to 133 by the end of Nov. I didn't need that 6 grand, now did I? Of course I could have used it. But I know I should never have been tracking it daily after my position closed at 103. I made money, period, end of story, walk away.

Those of you who got 4.9%, did you think it was a good deal when you got it? Of course you did. What is it to you if someone else buys a car the next day for 3.9%? You were satisfied yesterday, or you wouldn't have driven your car home. That one day may have cost you $11/mo. and $700 assuming you borrowed 25k for 5 years, but that's life.

It took me a long time to realize that I can't buy a stock today at yesterday's price. 3.9% is an incentive, it's not a readily obtainable interest rate to finance a vehicle over 60 mos.

Yeah, both of these are incentive rates to get you to buy the car. You're SOL as far as getting BMWFS to refi. That's not the business they're in.

Originally Posted by silversurfer

Tell me about it. I'm the proud owner of a new 335i sedan. Purchased it on 2/29 and financed @ 4.9%.

Oh well, just enjoy the car since there's no sense crying over spilled milk *sigh*

+1!!

[BIGGY]

Originally Posted by halfpast3

Question...if you paid $3.59 a gallon for gas at Chevron today and saw the same station selling it for $3.39 a gallon the next day would you ask for your money back? I know some of you are gonna think thats smart ass or insignificant but really, whats the difference?

There's a big difference. If you locked in a mortgage rate at 7% but then a year from then they drop to 5.5%, are you stuck in the 7% or can you refi? We're talking a sale vs finance for starters. One is a loan and one is a flat out purchase. On the loan, the terms and conditions can change. Even on sales, if a product you buy goes for some special price, generally when it comes to retail you can get a price match for 30 days. When you say it simply "what's the difference", then it seems that way, but in reality there's a lot more in the finance of one than the other.

Why didn't you phrase your question "You buy a $3000 TV one day, and then the next day it's on sale for $1500." Because we all know that you could get $1500 back if that was the case and it's the same with the car. Not a good that you've consumed like gas, milk, or yesterdays burger.

[vladinecko]

Originally Posted by BIGGY

There's a big difference. If you locked in a mortgage rate at 7% but then a year from then they drop to 5.5%, are you stuck in the 7% or can you refi? We're talking a sale vs finance for starters. One is a loan and one is a flat out purchase. On the loan, the terms and conditions can change. Even on sales, if a product you buy goes for some special price, generally when it comes to retail you can get a price match for 30 days. When you say it simply "what's the difference", then it seems that way, but in reality there's a lot more in the finance of one than the other.

Why didn't you phrase your question "You buy a $3000 TV one day, and then the next day it's on sale for $1500." Because we all know that you could get $1500 back if that was the case and it's the same with the car. Not a good that you've consumed like gas, milk, or yesterdays burger.

well said!

most stores will refund you money within 30 days if the price difference is significant enough. bug as BIGGY pointed out, giving gas prices as an example is ridiculous. what matters is purchases that actually cost you real money, especially when you finance them.