Earlier this week I wrote about mistakes we make when buying a car. One of those mistakes is overlooking the importance of the auto financing in the overall cost of your new car.
The example I gave is if you are buying a new Honda Civic, the difference between “sticker price” and the dealer’s invoice price (what the dealer paid for the car) is about $1,500. If you negotiate well, you could save $1,000 or more on the price of the car. If you then finance the car for four years at 6 percent with nothing down, you’ll pay over $2,000 in interest. Financing the car for three years at 4 percent with a $1,500 down payment, however, can save you over $1,000.