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Author: JAFO31 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75383  
Subject: Re: New passive investor looking 4 strategy crit Date: 2/6/2004 12:16 PM
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rookieJoe: "Oh, and the car loan is 0%."

You are an engineer, so I will assume that you ran the numbers, but 0% car loans where you forego a large rebate are not truly 0% (there is an inplied rate of interest resulting from the opportunity cost of foregoing the rebate) and are not even necessarily better deals than taking the rebate and financing elsewhere.

To calculate the implied rate of interest, take your loan payment and term, change the price to reflect the rebate, and then solve for the interest ratewould amortize that lower amount over the same term with the same monthly payment.

You simply hit one of my pet peeve issues.

Having said that, once the deal is closed, the 0% loan borrower has prepaid all the interest and rarely benefits from refinancing.

Regards, JAFO


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