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A: Because people tend to spend more when they borrow money, even at 0% interest.
You're probably right, but all I'm saying is that the math rarely comes out good when paying cash. Yes, many people will spend more if they don't have to part with a big chunk of cash all at once. That's a character flaw - just like paying cash because of the psychological comfort of not having a loan.
It depends on whether you mean this is the final payment on your last car ...or your last payment on your current car.
If this is not your last car, start saving the current payment amount toward your next car, so you don't automatically jump back into a long, drawn-out cycle of high car payments.
It also makes sense to save those 'car payments' in some type of an income-producing account, where you don't simply view it as a 'back-up checking account.'
This is how people get to the point where they pay cash for things, particularly things that depreciate, rather than indenture themselves to banks.
When you pay up front for a car with money on hand you're still making a car payment. You're just doing it in advance of purchasing the car.
I've only paid cash for a car once - when I was in high school buying a beater - all the other times I've used a cashiers check. I don't think many people actually pay cash for a car these days.
I'd put it away for a "car fund". I personally never want a car payment again.
I see it's a very "unpopular" opinion but idc...I don't by brand new or very expensive cars anyway Just something nice and reliable. My boss does this and it works great for him.
I think any variation of "bank it" or "invest it" is fine. Put it in a bank account, use it to pay down your mortgage faster, put in in your IRA, whatever. Pick whichever one suits. Just don't select the option "spend it!"
The point made by mysticaltiger just hit close to home.
My best friend who has always bought used vehicles, well he and wifey just bought wifey a $27k jeep, brand new, for a whopping $535/m payment, "just because she wanted it and we got approved ". They will pay back $32k++ over the five years. God, I hope it's only 5 years! They usually finance for 6. Even on used cars because they could never afford better.
Now he's saddled worth a $225 payment for his used car for another 3.5 years PLS Her car payment of $535...$760 worth of car payments instead of buying another used one. Their mortgage is only $600. They lost their last house due to not paying the mortgage!!
He never listens....tsk tsk.
He's on SSDI and she's an $18/hr nursing something.
His entire SSDI check now goes to mortgage and car payments. He says it's " alright cause the $535 comes out of HER money automatically. "
A: Because people tend to spend more when they borrow money, even at 0% interest.
This. It's really easy to rationalize "it's only another $100/month" or "it's a 7 year loan instead of a 4 year loan but I'm worth it" and buy more car than you should.
I pay cash for cars. It keeps me from spending more than I should. I'm high enough income that I don't need a separate new car fund. I can just dial back my spending for 6 to 8 months and create the cash to replace my car. I don't make big enough money for those cars to be luxury brands.
For me, the other thing I have to consider is that the older I get, the longer it takes to find my next job if something bad happens. When I was 28, my company could go under and I'd have a better job for more money a couple of weeks later. That actually happened to me. At age 59, there's no telling how much down time I'll have so I carry no debt at all beyond this month's charges on my credit card. In the last decade, I went through 14 1/2 months and 10 months. The size of my emergency fund is absurd. 3 years at my current burn rate and that includes the boat yard bills and the ski condo bills. If I had a bunch of debt, I could run myself out of money and have to start dipping into retirement savings. That would be a catastrophe but it was the reality of a ton of people at the Great Recession.
Because the amount of people who qualified for a 0-2% car loan are simply few and far between. And most 0% loans are manufacturer backed and don't give you the discounts/rebates you would otherwise
this is absolutely true and a good point. I bought my last car on an advertised special in the paper. Got a deal, way under MSRP. But you had to choose between the 0% financing they were offering or getting the deal. I took the lower price obviously. Ended up refinancing into a still low rate, but if you had a mediocre credit score, would absolutely make sense to pay cash. I think the initial rate was like 4% or aomething like that from the dealer before I immediately refinanced with a local bank
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