Wednesday, March 21, 2007

Two Related Interests

I spent the day today figuring out the right auto loan for my new purchase. Thanks to, I obtained a quick list of bank rates for car loans in my state. Of the top three, there was a 6.25% no fee, 6.35% $100 application fee, and a 6.55% no fee.

The typical way lenders confuse their customers is to add fees and hidden costs. But with this list, the most obvious choice is the 6.25% no fee. Unfortunately, they were a purely internet firm, and declined based upon the fact that I was not currently working, without giving thought to my employment contract.

This prompted me to question, is the $100 application fee worth it? Turns out, the 0.25% extra equates to an extra $95.48 for a loan of $17,000 over 5 years (yes, I am getting the other $20k from a parental loan). So, interestingly enough, the $100 fee made the lower fee a worse deal.

So why did I say two related interests? Well, today, at 2:15PM, the Federal Reserve reported they would keep the federal funds target rate at 5.25%.

This ended up being very good for me, since there was a chance the rates could go up. Had the rates changed, I would probably be looking at an even higher rate on my auto loans.

And worse for the market, if the target rate had risen, the market would have slumped, as people pulled money out of the market and until high interest rate savings.

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