if you could buy with cash....would you?

[SantaMar]

if you had the resources available that wouldnt deplete your savings, would you buy a car (say 25k)?  why or why not?  buying with cash leaves you without monthly payments and does save you money in the long run but also cuts out that money instantly from your savings on an investment that will loose money.  financing the vehicle allows you to retain more of your savings via a simple down payment but opens you up for extra fees and interest costing more then the sticker price over the loan term. 

help navigate this?

[Gunnar419]

I would absolutely do it. Financing a rapidly depreciating asset like a car makes little financial sense. Of course, most of us haveto do it because vehicles have become so expensive. But other than the convenience and necessity, it has no benefit at all.

Even if you're getting pathetic interest in a savings account, you're inevitably going to be paying out more in interest when you finance, even if you get relatively favorable terms. All for something whose value falls every day.

[Ditovera]

---

@Gunnar419 wrote:

I would absolutely do it. Financing a rapidly depreciating asset like a car makes little financial sense. Of course, most of us haveto do it because vehicles have become so expensive. But other than the convenience and necessity, it has no benefit at all.

Even if you're getting pathetic interest in a savings account, you're inevitably going to be paying out more in interest when you finance, even if you get relatively favorable terms. All for something whose value falls every day.

---

I think it depends on the deal you can get. if you have the credit, along with a down payment to qualify fo a 0% financing. It would be ideal to put that 20-15k in to a CD or saving account. On the other hand there is also the fact that your finance apr can be well over whatever saving or CD account can generate you over the financed term of the vehicle. Lets not forget not having the flexibility to lower your monthly insurance ( liability- if your the kind of person) with a financed vehicle.

[Poki]

I personally do not believe in the excuses to finance a car, but I don't hold anything against it since I'm currently financing my car.

[coterotie]

---

@Gunnar419 wrote:

I would absolutely do it. Financing a rapidly depreciating asset like a car makes little financial sense. Of course, most of us haveto do it because vehicles have become so expensive. But other than the convenience and necessity, it has no benefit at all.

Even if you're getting pathetic interest in a savings account, you're inevitably going to be paying out more in interest when you finance, even if you get relatively favorable terms. All for something whose value falls every day.

---

False, with tier 1 credit you can get below 1.9% interest rates.  The same money can be put into AAPL, HD, MO, CSCO etc. All yield more than 3% in dividend income. All would be considered safe, particularly at these levels.  Or you can buy Peurto Rican bonds yielding 8% exempt from ALL taxes (fed state and local)  The stocks all also have increased dividends almost every year.  Yes the car depreciates, but the payments match the depreciation (per se) and you keep your cash earning money.

[Kratos-TM]

If you are gonna buy cash, buy a cheap beater that'll get the job done for many miles. Don't buy a 50K car cash. To me that doesn't make sense to drop 50K out of your bank at one time.

I pay cash for my wife and I's 2 work cars.......they're usally 10K each, and we push the crap out of them until I have to buy another one. And then our "event" or "luxury" car I finance at 2% or less interest.

[aspen12777]

I agree.

I could have a car payment but I just bought my wife an 2003 Camry in Janurary for $6500. I paid cash. I have about 1K in repairs and maintenance (Tires, wheel bearing, CV joint, oil changes and a starter), 

I got the guy down a lot because I could tell the CV jointed need replacing and it needed new tires. We got it with about 120K on it. We have but 15K on it. We drive it as our primary car. I have a burb for family trips to the mountains and it sits most of the time (2001 I got 4 years ago for 6K and have put 60K on). The point being we are only into the car for 7500 and I could sell it today with out trying for 6K. For just the car I am paying 10 cents a mile currently.

The first owner I am sure paid 20,000 and sold it to be for 6500. Without interest or maintenance he is into it for 13500 and put 120K on it. It cost him at least 11.25 cents per mile. And that does not inlcude braks, tires batteries, oil changes or interest.

I am firm beleiver in looking around for a good used car and spendin 6-8K on it. Get a car they made a lot of. My half shaft was $80 bucks for an axel and $120 for a starter (thats cheap). 

I like new cars just like the next guy, but they cost you. To each there own.

[Revelate]

I once bought a car with cash (on the order of 35K IIRC back in 2000) and it's one of the primary reasons my walk towards credit goodness has been longer than it needed to be at this point in my life too.

I will never, ever, buy again with cash, unless interest rates go up to something truly obscene, though I'm admittedly assuming my credit is never going to be all sorts of awkward again, and that I will continue to have documentable income / assets.

In any event, my rationale is for a few reasons: the car payment for me is not out of my price range, and there's a lot better things in my mind than blowing a stack of cash on the car such as keeping that money in savings or elsewhere as life can throw all sorts of curve balls at anyone.  Additionally, an auto tradeline is absolutely a high quality one, right behind a mortgage in my book, and there's a lot to be said for having them on one's credit report.  

I typically drive my cars on the order of 7-10 years and often buy used, so I don't keep churning loans over that much anyway.  Also I have a habit of paying loans way in advance, but this is more as a result of my current sub-optimal interest rates... if I had one of these nifty 1.99% loans from either Penfed or DCU and I weren't trying to clear as much room as possible on my mortgage DTI calculation, I'd probably just keep it for the full term: funny thing, think Penfed is offering a higher CD rate than 1.99%, though admittedly inflation would render that moot.

My theory anyway.

[Elcid89]

---

@SantaMar wrote:

if you had the resources available that wouldnt deplete your savings, would you buy a car (say 25k)?  why or why not?  buying with cash leaves you without monthly payments and does save you money in the long run but also cuts out that money instantly from your savings on an investment that will loose money.  financing the vehicle allows you to retain more of your savings via a simple down payment but opens you up for extra fees and interest costing more then the sticker price over the loan term. 

help navigate this?

---

Typically no, because I can utilize the funds to garner a higher return than the nominal rate of interest that is charged on the vehicle loan. Paying cash for the vehicle denies me 5 to 7 years of compounded capital gains.

[Noctilum]

I finance simply to have it on my credit history.  Get a 12 month loan, make a couple of payments and then pay it off.