No. of Recommendations: 1
>>The insurance company could care less what you paid for the car, or if you owe more than the car is worth.


>>Many insurance companies will give you 'replacement' costs in the first year.

I think mine just pays wholesale book value.

>>After that, they give you wholesale book value. REgardless of what you paid.

Yup that's my point. They pay wholesale, but the lender is owed the principle.

A hypothetical situation using some round numbers... Choice A: $20,000 at 0%, B (with rebate): 17,000 at 5%. Lets after a year it is totaled, and depreciated wholesale value (what the ins co. pays) is 13,000.

If the vehicle were financed using choice A, it might have a remaining principle around 16,000, while choice B might have had a remaining principle of around 14,000.

If the vehicle was financed with choice A, you owe the lender 3,000 in addition to the insurance payout. But if the vehicle was financed with choice B, you owe 1000 in addition to the insurance payout.

So I view the rebate options as providing some level of "insurance" against owing more than it is worth. Its not worth paying an extra 100 per month, but if the rebate option is a couple dollars per month more, I would do it.

With the exception of the first year for people with the type of insurance coverage you mentioned... Do you agree, or am I missing something?

Print the post  


The Retirement Investing Board
This is the board for all discussions related to Investing for and during retirement. To keep the board relevant and Foolish to everyone, please avoid making any posts pertaining to political partisanship. Fool on and Retire on!
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.