No. of Recommendations: 0
"I have to disagree with you and side with TMF2Aruba on this one. It just ain't so.

You need to compute the APR the same way you would when comparing mortage rates (when loan origination fees are figured in)."

I'd like to see your figures, because when I calculated it myself, it was much better to take the financing then to take the $1000 rebate Ford was offering.

Plus, for purposes of your argument you are assuming that the consumer HAS the entire price of the car to set down on the table. Remember, you don't get ANY rebate unless you pay CASH for the car. They give you either or, but not both.

Moreover, you are not taking into consideration the amount one can earn if you invest the money in the stock market during good times, or simply earn 5% on a broker's sweep account if the money is in cash.

As I recall, the use of their money for financing a $26,000 van at 4.8% SIMPLE financing (the car dealers give you simple interest financing) amounted to $2104.31 in interest over 48 months. The payments were
$573 per month. So it costs me $2104 to use their $26,000 for 4 years. Meanwhile, to date, by investing the money, I have made about a 20% return, not to mention that I have used the very risky and tricky method of selling calls to make the payments, thereby retaining the $26,000 principal. I could have saved $1000 on the price of the vehicle, true, but then I would lose the use of the $26,000 forever. No investments, no 20% return. I based my decision not just on the relative costs of the vehicle adding in the lost $1000 rebate, but the value of the money if wisely and skillfully invested, and determined, in my case, I was better off with the 4.8% financing.

This does not mean it is the right way to go for everyone. I think that consensus does indicate that the majority of the people here think that using the MBNA card is not a preferable option.

I think the safest option is to make oneself the passbook loan on the money, and pay it back at 1% interest. Were it not for the fact that I thought I could do better in the stock market given the history of the past year, it is the option I would have chosen myself.


Foolish Venturist
Print the post  

Announcements

UGC Disclosure Notice Regarding Credit Card Posts
Community board discussions about credit cards are not provided or commissioned by banks who may have advertising relationships with The Motley Fool. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser's responsibility to ensure all posts and/or questions are answered.
TMF Credit Center
The Motley Fool Credit Center arms you with real tools and simple messages, that will help you in every credit situation.
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
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.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
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.
Advertisement