Loan Term
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Member
Joined: Jul 2004
Posts: 185
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From: Atlanta
2015 E350 Sport
Loan Term
Today I ordered a blk/blk C230 SS 6-speed w/ fold down seats as the only option. I'll be financing, and since the loan is simple interest, the salesman recommended a 60 to 72 mo. term, and I could pay it off any time. Basically, I'm graduating college and want lower payments. However, I'm not fiscally irresponsible, so I want to make a smart decision, while rewarding myself for my hard work.
I've calculated a 19k loan over 72 mo at 4.9 APR at 305/mo, and 18k loan over 60 mo at 338/mo. using online calculators (left my financial at school). Any reason why not to take the 72 month loan now if I were to pay it off at 48 mo if I sell it, and not have to pay the remaining interest? Thanks
I've calculated a 19k loan over 72 mo at 4.9 APR at 305/mo, and 18k loan over 60 mo at 338/mo. using online calculators (left my financial at school). Any reason why not to take the 72 month loan now if I were to pay it off at 48 mo if I sell it, and not have to pay the remaining interest? Thanks
Member
Joined: Jan 2005
Posts: 91
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From: Southeast Florida
2012 GLK 350
I would take 60 month loan
The 60 month loan should carry a lower interest rate than the 72 month loan and the difference in payments seems inconsequential. You should work the downpayment/loan amount so that you do not have any negative equity in the vehicle, should you have to give it up unexpectedly.
Thread Starter
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Joined: Jul 2004
Posts: 185
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From: Atlanta
2015 E350 Sport
Thanks, with an 18k loan, I'll have 1/3 equity in the car, and will not be upside down. I agree, the payment difference isn't much, and I don't know MB's interest differences b/w the two terms, but I always enjoy hearing opinions.
Out Of Control!!
Joined: Dec 2001
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From: Obama Land
K Car
I'm not exactly sure why you're comparing financing 19K vs 18K, but here is the advantage of doing the 18K with a 60 month loan. Your payment will be approx. $33 more per month, but after 48 months you would have paid approx $1,955 more in principal. So you would have this much more in equity in the car at 48 months versus the 72 month loan. Even if you were to bank the extra 33 per month, it would still only equal $1,584 after 48 months (not including any interest).
To compare apples to apples, if you were to finance 19K (instead of the 18K) for 60 months, your payment would be around $357 per month, or $52 more per month than the 19K for 72 months. After 48 months you would have $2,717 in additional equity. Saving the $52 per month would only net out $1,716.
This is assuming the same interest rate. It may be possible for you to get a lower interest rate on the 60 versus the 72 which would benefit you further.
Bottom line is it's almost always financially better to finance over a shorter period of time. That way, more of your payment is going toward principal, and less toward interest.
To compare apples to apples, if you were to finance 19K (instead of the 18K) for 60 months, your payment would be around $357 per month, or $52 more per month than the 19K for 72 months. After 48 months you would have $2,717 in additional equity. Saving the $52 per month would only net out $1,716.
This is assuming the same interest rate. It may be possible for you to get a lower interest rate on the 60 versus the 72 which would benefit you further.
Bottom line is it's almost always financially better to finance over a shorter period of time. That way, more of your payment is going toward principal, and less toward interest.
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Joined: Jul 2004
Posts: 185
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From: Atlanta
2015 E350 Sport
You're right about the number comparison. I figured if I have a longer term, I could pocket 1k to use for something else and have a slightly lower payment, but it's no big deal. I'll prob go with 60 months since it should always make sense to pay a shorter loan, no matter if it's simple or compound. The salesman also mentioned that since the C class model year will be closer to year end, they may have lower financing rates or cash back.
