Last post on May 22, 2013 at 1:35 PM
You are in the Prices Paid - Buying & Leasing Experiences
What is this discussion about?
Acura MDX, Car Buying, SUV
Dec 03, 2012 (10:01 am)
I am looking to buy 2012 MDX Base in Northern NJ area and looking to get an idea of prices paid so that when I walk in to the dealership, I have better understanding of pricing being offered. Also I wasn't sure if Acura offers balloon payment option given current 0.9% financing option and the last payment as balloon payment. Please share your experience if you were able to get the balloon payment option.
#12401 of 12873 Re: 2013 MDX TECH [billy3554]
Dec 03, 2012 (10:27 am)
All of this is true!!!!!!
To take it a step further, my visa card is offering 0% for 15 months, so I could have just written a check for the car from there and not paid any interest at all, but the downside would be having to pay it off in 15 months would have resulted in my wife having a payment of over 2K per month, but it certainly is a very viable option.
Ultimately it just comes down to a choice. Pay more per month to accelerate your equity but live with a higher payment. In my case keeping the payment under 500.00 was as much a psychological thing versus an actual need for my wife's peace of mind. As to setting the down payment aside in a lockbox for payment assistance, it certainly seems like a good idea, but in reality that 3K would be allocated to doctor's appointments and groceries instead.....and knowing that, I opt to put it in the car to get to the magic under 500 threshold.......
I can pay the car off any second I so choose which would REALLY accelerate equity, but for me, I can make my money grow more than 3.25 percent per year.
As to whether the advice here is warranted or welcome, I dunno.......maybe someone will benefit from your guy's number crunching, but I'm guessing anyone here could have figured all that out on their own and ultimately might have chosen what you suggest, or might choose what I did (lower payment for longer term at a higher rate).
This whole debate could have been eliminated though if Acura just decided
to do .9 for 72 months but it's not really my debate, I'll leave it to you guys to argue the finer points of. As for me, it was just a choice and I chose to give my wife the lower payment......
#12403 of 12873 Re: 2013 MDX TECH [zuluwarrior]
Dec 03, 2012 (11:43 am)
I can make my money grow more than 3.25 percent per year.
Great, but can you make your money grow at 38.9% per year, because that's what this choice is costing you.
That $55.66 lower monthly payment saving you $2,338 in monthly payments over 42 months, will cost you $4,329 in lower equity in month 42. You would have to take each $55.66 in monthly payment savings and invest it at a return of 2.78% per month, compounded monthly to end up with the equivalent of the equity you won't have in the MDX. That's a 38.9% annual return.
Do the math if you don't believe me. First month's $55.66 savings turns into $171.13 in 42 months, second months turns into $166.51 in 41 months..... 41st months savings turns into $57.21 in 1 month. Add them all up and in 42 months, you have exactly $4,329 to offset the equity you don't have in the MDX.
Frankly, the reason I am belaboring this isn't really to chastise you, but to make the point that, while most people here are intelligent enough to figure out the math, I think a lot DON'T and as a result, make egregious errors in judgement based upon a lack of accurate and thorough analysis. Like on the basis of "I can make more than 3.25% on my money". That sounds simple enough. But doesn't take into account that by increasing your payment a measly $55 per month, you are saving 2.35% in interest rate (3.25 vs. 0.9 difference) on the entire $31,900 loan balance every month.
Maybe I should set up an Edmund's Auto Loan business. Given the opportunity, I would have offered to pay you $65 per month to take the Acura loan in exchange for you giving me the additional equity you would have had in 42 months. You could have saved another $10 per month/ $420 total and I would have ended up with $4,329 on an investment of $2,757 over 42 months. That's a 28% annual rate of return for me. Heck, make it $75 that I'll pay you. That's still a 19.6% annual return for me. How about next time??
#12404 of 12873 Re: 2013 MDX TECH [habitat1]
Dec 03, 2012 (2:46 pm)
Dealers love nothing more than "Payment buyers"! (Except for old people with very fat wallets and presidents who give away "Cash for Clunkers").
Thank you for doing your analysis--it will certainly help some people who couldn't do the math themselves.
#12405 of 12873 Re: 2013 MDX TECH [habitat1]
Dec 03, 2012 (7:40 pm)
I wonder how many people are going to read this and actually be led to believe that you can twist a difference in annual percentage rate on a loan of 2.35 percent into a 28 percent annual rate of return, or 39, or 19 or whatever you spewed.......
What they won't see and what you haven't told them is that EQUITY has absolutely nothing to do with RETURN ON INVESTMENT. Equity is defined as the difference between what you owe on something and what you get for it, period!
In this case, the additional equity that I would have achieved after 5 years taking the Acura loan must be offset by the ADDITIONAL PAYMENT I HAD TO MAKE DURING THAT TIME, in this case, about 60 bucks a month or 60 months, or 3600 additional dollars, and you're trying to tell me that this 3600 dollars just appeared out of nowhere in the form of 40 percent interest paid to me???? Are you smoking mushrooms? The equity is offset by the additional payments made plus the interest savings, but the interest savings based on anyone's numbers will never ever exceed 2.35 percent per year. So there you go.........I forewent accelerated equity in exchange for a lower payment which is an offset, not a loss, not a gain......not a MAGICAL 40 percent return on investment......
Also, to state that dealers LOVE payment buyers, you're correct, but in this case the dealer lost because of this payment buyer, because I financed through my credit union, not through their lender who would have given them a little fee on the backside. Dealer didn't get to sell me any add ons either, no warranties, no credit life, no accident a health, no gap protection, no undercoating or glass etching, NOTHING! payment buyers love that crap.
Payment buyers also never seem to focus on one thing a time. I do......It's price first, then trade in, then interest rate, then payment, not the other way around. I'm convinced, I got a decent discount on this car, I had lots of equity in my other car (PAID FOR OUT OF MY POCKET IT DIDN'T APPEAR MAGICALLY VERSUS SOME OTHER INTEREST RATE......the equity was created by me! ) and then I created some more equity with a downpayment on this one to arrive at my wife's magic comfortable payment amount which was 489.00 a month, the same as the payment on her last one......
a 2.35 percent premium paid in annual percentage rate will NEVER morph into the magical "I Failed simple math" numbers that you are spewing
The return on investment for opting for the other loan would have never ever exceeded 2.35 percent per year and the additional equity created
by the one year shorter term would have come out of my pocket,
and that my friend is not return.......that's called the INVESTMENT!
I owe 32000.00 on a car that listed for 48000.00 2 days ago. I THINK I DID OK!!!!! I didn't buy on payment, I SELECTED a payment for myself and
was willing to pay the price for that payment.
As I've said, if someone else wanted to do the .9 percent rate, they
could certainly do so and their payment would be in the mid 500's
and yes, the equity would accelerate faster, but it would never accelerate faster without their 60 buck a month additional investment and that is the one thing you missed in your twisted alice in wonderland assessment.
I hope my illustration of the deal I made prior to all of this financial counseling helps someone else......I won't be posting anything else
unless Habitat tells me about a new Ponzi scheme that would have
resulted in my Acura sitting in my garage right now with a free and clear
title with no investment from me at all LOL
For those of you wanting to convert a .9 percent annual percentage rate into a 39 percent annual rate of return, check with habitat.....he will send you his pamphlet entitled "Hallucinogenic money advice and what it means to me".
#12406 of 12873 Re: 2013 MDX TECH [zuluwarrior]
Dec 04, 2012 (3:30 am)
Listen zulu-warrior, maybe if you spent half the time you did writing the last post, and instead did a little Excel spreadsheet for yourself like I suggested, we wouldn't be having this debate. Let me try to make it as simple as possible. Pick the item below that you don't understand or believe:
(1) You have a $32,000 loan.
(2) You chose 3.25% rate for 72 months = $489.75 payment (assumes end of month)
(3) Acura offered 0.9% for 60 months = $545.62 payment
(4) Difference in payment = $55.87 per month
(4) In 42 months you trade, sell or crash the MDX into a tree.
(5) Your payments were $2,346 less during that time
(6) Your loan balance at the end of 42 months = $14,094
(7) Your loan balance under Acura loan would have been = $9,751
(8) Difference in loan balance is $4,343
(9) You traded $55.87/month, $2,346 total for a $4,343 higher loan balance in 42 months.
(10) Your $2,346 "savings" would have to grow by 85% to become $4,343
(11) That would be a 19.2% annual return if you had full 42 months to invest $2,346. You don't.
(12) Each $55/month would have to be invested at 38.9% to get to $4,343 in month 42.
(13) Re-read above slowly if necessary.
If steps 10-12, an internal rate of return (IRR) analysis, is confusing that's OK. Re-read #9 a few times. And tell me how you think saving $55 per month but then owing $4,343 more in 42 is a financially prudent decision? Or tell me what step above you don't agree with??
As for "Hallucinogenic money advice and what it means to me", great idea. A couple of chapter themes:
(1) Putting $100 per month in savings in 1969-1974 when I was a kid from a paper route/grocery store job that covered the first year of MBA school in 1980.
(2) Paying off student loan to cover second year, ahead of schedule.
(3) Paying off a 30 year 8% home mortgage loan (taken in 1988) in 13 years by refinancing to a lower 15 year rate and making $300 additional principal payments every month.
(4) Never having a car loan in my life.
(5) Keeping most cars for 8-10 years and 100k+ miles so that I never even think about (4).
(6) Having a responsible daughter that's happy to drive a loan-free 2005 MDX with 116,000 miles, even though it doesn't have the latest do-dads.
(7) The fun of shopping for a Cayman S, with my checkbook in hand.
(7) The far greater personal satisfaction of of being able to fund scholarships at my high school and college to honor my modest parents who taught me financial responsibility.
Oh yeah, I could write a book. But it probably won't have a chapter about "The virtues of trading cars that haven't made it to 20k miles every 3-4 years and taking out 6 year loans at higher rates to assure that you are forever stuck in perennial auto loan debt"
Seriously, you made a choice that is 100% your prerogative. I'm simply pointing out the math that I think you should have considered doing, beforehand. Your previous post suggests you really didn't get my previous attempt. Perhaps now. Or we can try again in 42 months. Enjoy your new MDX now and I'll enjoy my Cayman S in a few months. And hopefully no hard feelings either way.
#12407 of 12873 Re: 2013 MDX TECH [zuluwarrior]
Dec 04, 2012 (10:20 am)
Sorry if you took offense to my reference to "payment buyers" but my post wasn't directed solely at you. If that had been the case, I would have responded directly to you.
My intent was to support habitat1's assertion that it's unwise to accept a higher interest rate and a longer term in order to make the monthly payment acceptable. Generally speaking, trading a 2.35% interest premium for an extra 12 months is a bad idea. Less experienced buyers could benefit from habitat's implicit advice that if one can't afford the payment, he is probably better off doing something more constructive with his money than buying a car that is beyond his means.
The purpose of this forum is to share information and advice with potential car buyers. Many people apply the advice they pick up on these forums at the dealership and save money they might have given away. I'm willing to bet that for every person who takes offense to the advice given here, there are ten people who learned from it.
Finally, I disagree with habitat1 in one area. I love having a car payment. If somebody wants to give me nearly-free cash (low interest rate loan or a big rebate) that I can apply to my mortgage or investment portfolio, I take it every time (assuming I'm buying a car anyway). Heck, two of my cars are paid off and I'm thinking about refinancing them at 1.75% so that I can pick up cheap stocks after Obama drives us off the fiscal cliff...
#12408 of 12873 Re: 2013 MDX TECH [zuluwarrior]
Dec 04, 2012 (2:59 pm)
Habitat numbers do add up....
and as you said you always have to choose
The best choice is always to buy a car that you can pay cash.
Next best is to minimize the total interest paid over the life of the loan and by life I mean the time you intend to keep the loan not the maturity term.
We all come here to save few hundreds in cast of the vehicle and then spend it all in interest.
Hope you do not do this with bigger ticket items like house.
We all make mistakes/overlook things the key is to learn and move on....unless the plan is (knowingly/unknowingly) put yourself in a situation to have someone come and bail you out.
Enjoy the vehicle.
#12409 of 12873 Lease 2013 Acura MDX 36 months 12k miles/yr
Dec 04, 2012 (7:29 pm)
just concluded a lease deal for 2013 Acura MDX Base 12k term=36mo
Monthly payment inclusive tax=$485 Drive off=$1289(inclusive 1st payment, registration/DMV fees,etc)
Is this a good deal.... Thanks for your response