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Old 10-12-2012, 02:38 PM
sgbotsford sgbotsford is offline
LawnSite Member
Join Date: Aug 2012
Location: Alberta, Canada
Posts: 107
There is no free lunch. If the claim is zero interest, then the interest is built into the price. If the going real interest is 5% then roughly 10% of the price is interest. (Interest rate * years * 1/2) (This is the simple linear interest model. I'm not going to do logrithyms in my head to do it right.)

Small equipment and vehicles have terrible interest rates, because of their steep depreciation and portable nature. You are probably better off to pay cash, and set up a line of credit based on either your business or home real estate.

The dealer almost certainly discounts your paper to a bank or loan company. That is, he will sell your 165/month x 4 years to some company for less than 7,500. Ask him candidly what it costs him. Then offer him $50 over that cash sale.

The ONLY time to not pay cash:

* You really cannot afford it.
* It generates far more revenue than the payments.
* You suspect a rat in the wood pile, and you want the threat of witholding payment as possible future leverage.

Always arrange your finances so that whatever debt you have is at the lowest possible rate of interest.
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