03-27-2006, 10:30 AM
ZX3TUNR,Mar 26 2006, 06:39 PM Wrote:Loan is taken out for 5 years then my final buy out is 8500 witch they refinance for another 2 years. I will probably just get a newer car by then.Then it's not really a loan, it's basically a lease. I think Honda calls it their "Future Value Finance Program". Only difference, the car is in your name. But unlike a lease, at the end, you can't walk away, you have to sell the car; you still owe $8500 to pay off the loan. If a 6 year old Civic is worth only $6000, you still owe $2500. I HOPE the contract you got offered a guaranteed full price buy-back!
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So...
$23,000-$8500 = $14,500 of your car is paid off AFTER 5 YEARS!!
Again, $350/mo x 12mo x 5 years = $21,000
FV=P(1+r)^n
21,000=14500(1+r)^5
r = annual interest rate = 7.7% !!!
If they were "nice" enough to give you the same rate,
FV=8500(1+.077)^2= $9860
In the end you paid $21,000+$9860 = nearly $31,000 for a $23,000 car.
By the way, if you refinanced that remaining $8500 ($9860), your monthly payments increase to $410 a month for a 6 year old car.
And you thought Ford was giving you a ride?
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