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Author: rookieJoe Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75539  
Subject: Re: New passive investor looking 4 strategy crit Date: 2/6/2004 8:41 PM
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t,

I think we may not be communicating well...

I agree that in the example discussed, the rebate option is better because of the calculator you reference. And that in many other cases it will be better too. I see how you got the 1400, and agree there too.

I was taking all that as fact, and was trying to point out that if loan must be paid off early, this too affects the total cost differences. And that this difference is in favor of taking the rebate option. Although the chances of this happening due to a crash are low... If it does happen, the advantage of the rebate option could be substantial.

Assuming both loans under consideration are for the same period of time... At the beginning of the loan, the amount of the advantage (with the rebate option) is equal to the amount of rebate. Over the term of the loan, the advantage diminishes to 0 with the final loan payment.

Certainly the primary consideration should be: which is better if the loan is not paid off early. In some cases, the calculator tools say it doesn't matter. Then another point to consider is the implications of the loan ending early.

As for the $100/month... Like all the numbers in my example, I made that up. I was trying to point out that the advantage of the rebate option from an early loan payoff was not worth paying a lot of money for. But depending on someone's personal situation, it might be worth paying a little extra. Especially if the person is considering the overpriced insurance the "finance guy" offers for if the car is totaled while owing more than its worth. I wouldn't buy that insurance, but if someone wanted it... it would be worth grabbing a depreciation chart for the vehicle, and charting the additional payout over the term of the loan Vs cost. By making a similar chart to compare the principal differences between financing options ("payout") Vs how much the calculator said the 0% option saved ("cost"). Even if calculator said the the 0% option is best, taking the rebate option may be more cost effective than buying the insurance. Hopefully this expansion of my logic didn't add to the confusion...

I'm having trouble figuring out if I'm being unclear, if you're disagreeing that this is an advantage of the rebate option, or you're just trying to say the comparison of the calculator is most important.

-Joe
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