I'm currently looking to buy a new car. I have savings of 13,500 which I was going to use but have being doing some figures which seem to suggest that it would be cheaper to borrow and keep my savings in the bank can this be right?
Here are the workings I am basing this on.
Loan Rate = 7.49% available from local credit union
Savings Rate = 4.3% with rabo Direct (3.44% net of DIRT)
Repayments on 13,500 @ 7.49% over 3 years = 419.81 per month.
Cost of Borrowing
Interest on Loan (13,500 @ 7.49% over 3 years) 1,615.39
Less interest earned on savings (13,500 @ 3.44% for 3 years) (1,442.00)
Total Cost of Borrowing 173.39
Cost of Using Savings
Oportunity Cost (ie Interest on savings above) 1,442.00
Interest earned on Saving "Notional" Pmnts (783.51)
Total Cost 658.49
Is there something I am leaving out? Doesn't Eddie Hoobs always say its crazy to borrow at a higher rate than your savings are earning?
Here are the workings I am basing this on.
Loan Rate = 7.49% available from local credit union
Savings Rate = 4.3% with rabo Direct (3.44% net of DIRT)
Repayments on 13,500 @ 7.49% over 3 years = 419.81 per month.
Cost of Borrowing
Interest on Loan (13,500 @ 7.49% over 3 years) 1,615.39
Less interest earned on savings (13,500 @ 3.44% for 3 years) (1,442.00)
Total Cost of Borrowing 173.39
Cost of Using Savings
Oportunity Cost (ie Interest on savings above) 1,442.00
Interest earned on Saving "Notional" Pmnts (783.51)
Total Cost 658.49
Is there something I am leaving out? Doesn't Eddie Hoobs always say its crazy to borrow at a higher rate than your savings are earning?