Option 5: (suggested by friend at lunch) Get a zero percent loan for 60 months, but the price goes up to 41,000 / 60 = 683. month - and put 41,000 into a new bank account at say 3% interest - Have car paid directly out this account - Annual interest income of 1,230. will cover almost 1.8 car payments per year.
Objectives - Don’t want a large payment, but would prefer not to tie up $ 41,000 either. Option 2 is probably what I would be most comfortable with payment wise, but zero interest options might make most sense financially over time.
Any input on most practical choice among these scenarios?
Go with 0% financing - it is a Free Loan, after all. I assume the increase from $39,000 to $41,000 is due to licensing, loan fees, etc.
You don’t have to tie up all the money in a savings account or whatever - the benefit is that you have use of the money and the vehicle at the same time. Put a year’s worth of payments in a savings account and put the rest in bond fund, invest it in a REIT, do anything with it that will get you some money back.
If you write the check for $39K you immediately eat all of the depreciation without any chance of getting it back. By spreading out the payments (interest-free) you get the chance to use your capital to earn some money, thus offsetting the depreciation of the vehicle.
Your last line indicates option 2 as your first choice, but then you talk about zero-interest options as well - I thought option 2 WAS zero-interest.
Anytime you get to use someone else’s money for free, take it!