Cash or Loan?

[hooligan]

If you're going to do cash, you can probably actually do better by financing it and then paying the loan off right away. Dealers make money off the loans, so they'll often times give you a little better price if you finance it (dealer incentives, etc). Just make sure no pre-pay penalties, etc.

This is what we did on our last 2 cars. I hate having a car payment so as soon as we were past the early pay off penalty we paid off both cars.

[M16]

Well it will be a car for my wife. Both are in our 70's, good health, and retired. The cash will not be missed. Have always paid off loans early, guess that is why I don't like loans. Never lived over my means, but very comfortable. Just wanted some thoughts and different opinions. Thanks all!
Cash it will be.

I think you are making a smart move. Most people don't pay cash cause they can't. Invest the money? What if the investment turns south? You lose your money and still have a payment.

But what if you pay cash for a vehicle and then need the money? Get a loan and use the vehicle for collateral.

[tradslam]

Paid cash for my 2017 tundra, kinda stupid on my end. They had 1.9% financing, I could of used a bottle of jack and a spinning wheel and got more then outa my cash.

[Throwin Darts]

When you get a so called 0% car loan the interest is figured in the price. Do you really think you are getting something for free? Usually you can choose between a rebate or an "interest free loan." What ever you do don't finance it if you intend to pay it off right away. If you do you paid for the interest upfront.

You can explain this over and over and some people will never get it.

People a "0% loan" is not interest free. You just pay interest upfront.

[breederbuck33]

Well not a rich guy with a Rolex on my wrist. (Don't own a watch or cell phone) But you can't take that money with you. Can't see having payments. Thought I would ask. At my age I don't buy GREEN banana"s.

You seriously don't own a cell phone?!

[8mpg]

What percent is that cash payment compared to your savings? If you have plenty of savings, cash is probably the way to go. If you are spending your nest egg on a car note, I dont think its wise.

I'll take cash in the bank anyday over owing 2.5% interest on a car note.

[dustoffer]

Just bought a new Equinox and I financed the minimum with GM. Why? I got an additional $1095 off the drive-out price. I'll write a check to them when the first payment is due and call it a win as a month or so at 6% on $10k won't begin to add up to the $1095 price reduction.

[35remington]

This may not be relevant to the OP, but enough of y'all are here that maybe someone will know. I have never financed a car so I don't know.

If you finance a car, does the bank require a certain level of insurance coverage to be maintained?

If you finance a car, can you still modify it with aftermarket parts while it's being financed?

[White Falcon]

No cell phone and don't miss my 24-7 work phone. It's great!

[ReydonPete]

Well it will be a car for my wife. Both are in our 70's, good health, and retired. The cash will not be missed. Have always paid off loans early, guess that is why I don't like loans. Never lived over my means, but very comfortable. Just wanted some thoughts and different opinions. Thanks all!
Cash it will be.

I think you will be happy this route

[westtexducks]

You can explain this over and over and some people will never get it.

People a "0% loan" is not interest free. You just pay interest upfront.

So just for giggles some quick numbers on a 40k truck and a 38.5k cash payment. This will be assuming a 0% interest rate loan and a 5% rate of return on an investment over a 3 year period. So if you are getting 5% on a 36k investment assuming you put 4k down on the truck you are looking at $5674.50 return over the 3 year term interest compounded annually. Subtract out the $2500 difference from paying cash and your still $3174.50 in the black that you miss out on by paying cash for your truck. And that is assuming a modest 5% gain and compounded annually so if it compounds more frequently you stand to make more money.

Now do the same math assuming you carry the term out over a 5 year term and you stand to gain $7446.14 if you take the 0% interest loan and invest the 36k at 5% gain/year.

[Dushon]

[QUOTE=35remington;13488894]This may not be relevant to the OP, but enough of y'all are here that maybe someone will know. I have never financed a car so I don't know.

If you finance a car, does the bank require a certain level of insurance coverage to be maintained?

If you finance a car, can you still modify it with aftermarket parts while it's being financed?[/QonUOTE]



If you owe on it you’re required to carry full coverage. And yes, you can modify it.


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[M16]

So just for giggles some quick numbers on a 40k truck and a 38.5k cash payment. This will be assuming a 0% interest rate loan and a 5% rate of return on an investment over a 3 year period. So if you are getting 5% on a 36k investment assuming you put 4k down on the truck you are looking at $5674.50 return over the 3 year term interest compounded annually. Subtract out the $2500 difference from paying cash and your still $3174.50 in the black that you miss out on by paying cash for your truck. And that is assuming a modest 5% gain and compounded annually so if it compounds more frequently you stand to make more money.

Now do the same math assuming you carry the term out over a 5 year term and you stand to gain $7446.14 if you take the 0% interest loan and invest the 36k at 5% gain/year.

That's great. If there is no risk involved. Otherwise you also have to assume you could lose money as well. So where are you getting the 5% return with no risk? inquiring minds want to know.

[rtp]

I have paid cash for my vehicles for the past 20+ years. Last time out, Feb 2016, Dodge was offering a rebate and 0% financing. First time Ive had a vehicle payment in forever. Im pretty sure my being able to keep that money invested has already put me in a favorable position on that deal.

[35remington]

So just for giggles some quick numbers on a 40k truck and a 38.5k cash payment. This will be assuming a 0% interest rate loan and a 5% rate of return on an investment over a 3 year period. So if you are getting 5% on a 36k investment assuming you put 4k down on the truck you are looking at $5674.50 return over the 3 year term interest compounded annually. Subtract out the $2500 difference from paying cash and YOU'RE still $3174.50 in the black that you miss out on by paying cash for your truck. And that is assuming a modest 5% gain and compounded annually so if it compounds more frequently you stand to make more money.

Now do the same math assuming you carry the term out over a 5 year term and you stand to gain $7446.14 if you take the 0% interest loan and invest the 36k at 5% gain/year.

Can you run the scenario where the guy loses his job at the end of Year 1? What does he do then?

Also, did I miss where you adjusted for the IRS's cut of those stock market gains?