topic Re: Buying A Car... Pay Cash or Finance? in Rebuilding Your Credit

Buying A Car... Pay Cash or Finance?

Anonymous — Fri, 26 Jun 2020 22:25:08 GMT

I will be buying a car in the next couple of weeks should I purchase it outright or will financing help my credit score.

My end goal is to boost my score to buy a house in about 12 - 18 months.

Below is my current situation.

I am currently 6 years out from filing for chapter 7 (Mar 31, 2014) and almost 6 years from my discharge date (07/21/14).

I have not had a late payment or anything else derogatory since the discharge.

My FICO-8 is
688 (Equifax), 667 (Transunion), 683 (Experian)

My FICO Auto-8 is
707 (Equifax), 689 (Transunion), 709 (Experian)

I currently have 3 credit cards doing AZEO, which include:
Capital One (Opened Sep 10, 2014) $14,000 limit (5% Balance)
Costco Citi Visa (Opened Apr 17, 2019) $6500 limit (0 Balance)
B&H Synchrony (Opened Dec 17, 2019) $5000 limit (0 Balance)
Loans

NFCU SSL loan at (5% Balance)

Thanks!

Any suggestions would be really helpful.

Thanks!

Re: Buying A Car... Pay Cash or Finance?

AllZero — Fri, 26 Jun 2020 22:55:39 GMT

Score wise, you all ready have a SSL to boost your scores. Obtaining another installment loan will negate your optimized NFCU installment loan utilization.

Finance wise, if auto loan APR is low, it may make sense.

Re: Buying A Car... Pay Cash or Finance?

M_Smart007 — Fri, 26 Jun 2020 23:20:24 GMT

@AllZero wrote:
Score wise, you all ready have a SSL to boost your scores. Obtaining another installment loan will negate your optimized NFCU installment loan utilization.

Finance wise, if auto loan APR is low, it may make sense.

This is great advice

Re: Buying A Car... Pay Cash or Finance?

Anonymous — Sun, 28 Jun 2020 00:10:41 GMT

A lot of the experts say you should never pay cash for a car - at least not at the dealership. Reason - most of their profit is made at the F&I desk (Finance and Insurance) so if you cut that desk out the salesperson will simply increase the cost of the car to make up for the lost F&I profits. If you have the cash for the car, I would suggest letting the dealer do the financing and when the first payment is due, pay them all, meaning pay off the car.

Here's the math: I bought a new car last week. I had the cash in the bank. By letting the dealer finance the car, the dealer gave me a $500 Finance Bonus ($500 off for using their finance company). Here's how the math rolled out for me:

Cost of Car $26,090

Less Extras I refused to pay for (remove the extra or not, I'm not buying it) -$521

Less Finance Bonus -$500

Less Trade in -$8,000

Less cash down -$3,000

Less Manufacturers Rebate -$4,000

Plus Doc Fee +$489

Plus Sales Tax +$1137

Plus AZ License Fees +$472

Amount Financed $12,167

Loan Term: 36 months

Interest Rate 3.99%

Interest to be paid when I pay off the loan at payment #1 - $33.46

So a $500 discount cost me $33. Pay cash and there is no $500 discount. This is an actual car deal I bought on a 2020 Buick Encore in Tucson AZ on 22 June 2020. Here is a link to where a car guy explains this: https://www.youtube.com/watch?v=0S9cQOPxzfg

Re: Buying A Car... Pay Cash or Finance?

Anonymous — Sun, 28 Jun 2020 01:51:07 GMT

If you might buy another car from the same dealership in the future, you might consider making several months of payments on the loan before paying it off. The dealership often loses their kickback if the loan is paid off very quickly. If you won't be buying from that dealer again, you wouldn't care.

Re: Buying A Car... Pay Cash or Finance?

Anonymous — Sun, 28 Jun 2020 15:32:13 GMT

@Anonymous wrote:
If you might buy another car from the same dealership in the future, you might consider making several months of payments on the loan before paying it off. The dealership often loses their kickback if the loan is paid off very quickly. If you won't be buying from that dealer again, you wouldn't care.

I doubt they would remember a sale made a couple of years to a decade earlier. They would only be looking at the deal in front of them. Besides, they cannot make (or enforce) a restriction on prepaying the auto loan.

Re: Buying A Car... Pay Cash or Finance?

Anonymous — Mon, 29 Jun 2020 14:14:36 GMT

Thanks everyone for the great advice.

If I do finance the vehicle in order to save on the purchase price would I want to pay the loan down to 8% and ride it out or just pay it off?

Re: Buying A Car... Pay Cash or Finance?

gdale6 — Mon, 29 Jun 2020 14:52:31 GMT

@Anonymous wrote:
Thanks everyone for the great advice.

If I do finance the vehicle in order to save on the purchase price would I want to pay the loan down to 8% and ride it out or just pay it off?

Would depend on whether or not the lender credits overpayments towards future payments or not. Some do some dont and the ones that dont you would still have to make the regular payment in the next month even if you pay down lots of principal.