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Never buy from a "buy here pay here" dealer; they offer the absolute worst financing terms and they are the quickest to repo if you get behind on payments. They can make thousands on a $1,000 clunker just by reselling the same car umpteen times.
They don't sell cars they sell loans.
Kind of like the ray kroc thing where he asks the college class what business he's in. "MerKroc everyone knows you're in the hamburger business."
Wrong, look at our locations I'm in the real estate business.
Credit unions typically offer better rates, especially on used vehicles.
Not from my experience. Our credit union gave us the worst rates after 3 banks and the car dealership. We got 60 days with no interest from the car dealership, plus they gave us a bigger discount, about $500 for using their loan.
EDIT: we personally don't like being in debt, so we paid it off within the 60 days. The dealer tried to tell us we couldn't pay off the loan quickly, but you can. If the car dealer thinks they can take advantage of you, they will. Either on the loan or the car cost.
Why? Because 'you should never borrow for a depreciating asset'.... which will depreciate the same whether you purchase it outright or finance it?
Exactly! Whether you pay cash or borrow for the car, you lose the same amount of money every day, week, month, and year on the car due to depreciation. The only incremental expense with the car loan is interest, but at today's rates, it's a very small amount and much lower than the opportunity cost of nearly any other investment.
This concept also applies to leasing. Whether you lease or buy a brand new car, after three years the car has lost the same amount of value. The only difference is that the parties bear the risk differently as compared to a straight loan/own- in leasing, the bank bears the risk of excess depreciation not caused by additional mileage (i.e. if the projections were incorrect at the outset), but the driver bears the risk of incorrectly projecting how many miles he or she will put on the car over that period- drive too little and you overpaid at the outset, drive too much and you may have to pay at the end.
Last edited by NYCresident2014; 06-07-2017 at 08:45 AM..
NEITHER of these choices should be bought on credit.
I agree, ideally you want to pay cash for your car. But since that doesn't answer your questions. If it's a larger dealership, talk to the salesman. Ask if they will have a special promotion on interest rates soon. Many dealerships have special promotions for financing all the time. It's very possible to get a interest rate of .9%. If they are not going to have a promotion soon I would use a local credit union. They would be the next option for the best rate.
I agree, ideally you want to pay cash for your car. But since that doesn't answer your questions.
His questions and reasoning is about some juvenile notion.
If you can't pay cash for your toys... you do without them.
If the question was about a 2year off lease sedan vs a new car factory supported zero interest loan
because he has a 20,000 mile a year commute and needs the reliability vs other options...
the comments and suggestions and rationales offered would be different.
I agree, ideally you want to pay cash for your car.
I disagree. Ideally you should want to weigh your options and come to an informed decision on which is likely to be the better option for you. Sometimes taking the loan wins out (if you don't fall hook, line and sinker for the 'never take a loan for a depreciating asset' saying).
I disagree. Ideally you should want to weigh your options and come to an informed decision on which is likely to be the better option for you. Sometimes taking the loan wins out (if you don't fall hook, line and sinker for the 'never take a loan for a depreciating asset' saying).
Please explain how borrowing money on a car can possibly be a good idea. If you're talking about getting a low interest rate on your car loan so you can invest your money. That thinking is flawed. You shouldn't invest money you can't afford to lose. There is no guarantee you will not lose it. Especially if you're not an experienced investor. Essentially when you do that, you're gambling that you can make more on your money than the interest rate on your car loan. While paying cash for a car is a guaranteed savings of whatever your interest rate would be. All that gambling/leveraging debt is risky when you have no control over the future. You could lose your job or the economy could tank etc. Then you lose your job your car and half of the money you have invested. Then you pull the rest out to survive. Which is another bad idea. because that effectively leaves you buying high and selling low, which is the opposite of how you make money. I say all this to say there is no reason to take unnecessary risks with debt on a depreciating asset. If things don't go the way you plan it could just turn out really bad. If you have cash to pay for a car it's the smartest decision because it is a guaranteed savings. There's no possibility of you losing the asset if things go bad in the future or with your investments.
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