How to Finance a Car at 0% Interest (The Right Way)

How to Finance a Car at 0% Interest (The Right Way)

It’s brian preston the money guy uh this next let’s stay on that sort of debt uh idea because this is come from sc marbell and we get this all the time again because you guys are financial mutants and this is a question that’s not black and white there are some gray and i think we’ll share with the greatest it says how should zero percent financing rates available

Now for many dealers factor into your car buying recommendations i can pay cash but it’s hard to do it with zero percent interest how long should i carry out those payments and we get this all the time and it’s not just zero percent we get it when it’s point nine percent or one point nine percent how should i go about taking advantage of really low interest rates

If i’m in the position to do either or well first i mean and we’ve we’ve talked about this but i think it’s worth repeating the 23 8 rules we have with car loans just to review really quickly remember we think um with any type of auto purchase um first of all it can be a luxury brand if it’s luxury brands 12 months same as cash so you got to make it through the

Gauntlet of that first once you once you know you’re buying a non-luxury brand this is more of a practical car we’re okay with financing as long as it’s 20 down you don’t amortize longer than three years and it’s not more than eight percent of your gross income and then there’s one other caveat your investments have to exceed your monthly investments have to exceed

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What your monthly car payment is if you get that backwards you go really screw this thing up so with those type of understandings i i get it you especially because bo and i just had this conversation recently like honda is doing i think like zero percent for five years yeah so so it’s like wow i could i could really there’s a there’s an arbitrage situation i could

Potentially take advantage of but here’s the problem that always grounds me on vehicles vehicles are horrible horrible horrible for your your your balance sheet your net worth statement because they depreciate like a rock so even if you’re getting zero percent in the background you can practically hear it if you if you get quiet late at night you can hear the

Loss of value just running out it’s like a cash register just quickly running here that’s the money just dumping out of the exhaust pipe of your car on how fast it loses its value because that’s going on that’s why we do 36 months on the amortization you can do look i’m not going to tell you go you can take a 60-month loan with honda at zero percent but you need

To pay that car off within the three years because it’s depreciating and i think it’s just a good practice plus it will also keep you honest from buying more car than you can actually afford with your wallet because i think sometimes that’s the game that dealerships have figured out is that when america is focused on the payment not the actual total debt we got

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A solution for that we’ll just extend this thing out to six years seven years we’ll get your payment down to whatever you want it to you’ll just never actually own this car while it’s still depreciating like a rock in your driveway don’t fall victim to that get out of debt and it’ll also keep you like i said honest on what you can actually afford when it comes

To cars yeah i think one part of the 23.8 that we don’t often talk about as much that doesn’t get enough focus is the 20 part you got to put 20 down here here’s the real reason in our opinion one of the biggest risks you can run if you’re going to own an automobile and you’re going to finance it is becoming underwater on that auto meaning that you owe more than

The car is actually worth because you may be the best driver in the whole entire world but even if that happens and your car gets totaled right it’s an accident happens your car gets told insurance company says okay great hey we’re going to pay you this much for the car you’re gonna get a check for ten thousand dollars you’re like okay great but when you have

A loan that’s outstanding for like fourteen thousand you start thinking oh man i not only have to go get a new car i gotta satisfy that loan that i have outstanding you always want to make sure if you are financing a car and even though if you’re doing that three years you should know about how much that car is depreciating over that three year period and make

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Sure that you always stay above loan value on the equity that you have in the car meaning what it would be total for or what you could trade it in for now comment section a lot of people have said what about gaap insurance i mean what are your thoughts on gaap insurance because that’s what i hear we’ve even had people mention that on in our comments section in

My opinion i don’t think that gap insurance makes a whole lot of sense because i think if you have the appropriate equity in the car that you don’t really have run into that issue yeah why why pay for something for something that you don’t need if you’re doing it the right way following 23.8 um this is not the arbitrage situation that houses have a lot of people

Know that we have a a different take on if you’re under 45 years of age those low interest mortgages versus investing the difference is your house is not depreciating at 50 in the first you know three to four years of ownership and that that three that 50 depreciation should scare the heck out of you and you need to stay above because remember your whole goal

Is wealth building not wealth losing that’s right and automobiles are wealth losing behaviors treatments as such

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How to Finance a Car at 0% Interest (The Right Way) By The Money Guy Show