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So a few days ago I started reading a topic in the main Economics forum. It was about why people think the economy is bad. In it, someone mentioned he paid cash for his car and I think just about everyone in the thread told this poster is was not a smart move. I need to go look again but I think literally no one said paying cash was the better financial move and I can't figure out why.
I am looking to buy a car in the next year. I am on the fence with new vs. used. I saved up the cash to buy the new car outright but hope to find a good used one instead to save some money. I just figured I would use cash to buy a car. But that thread got me thinking, is it better to have a car payment? I always come out with “no.” But so many people in that other thread seemed pretty sure (but I don’t think anyone explained why).
I just can't figure out how a payment is better. If you go with a used car, the rates are higher than any interest bearing account. So that makes no sense to me. I had to do more digging with a new car, but it seems that those low rates and 0% rates often come in lieu of cash back or other money saving incentives (to the point where maybe it's a wash). I don't know how true it is, but I read that it can also be harder to haggle down the price of a car when low interest is in the mix. It seems you have better negotiating possibilities (for a lower overall cost) with cash.
In what instance does financing a car make more sense than paying cash?
When you have the money allocated STRICTLY for a car purchase and buying cash isn’t going to strain any finances. I hear and see the “If your money makes more in a savings type account and if you can get a lower rate get a loan”. . That’s great IF you have such account with all that money and IF you have the credit to qualify for a low low 0-2% loan. Then you can buy in such way.
The problem is a lot of people simply do not have 25/35k+ cash laying around to buy a car. Nor do most people have such credit to qualify for such low rate. Contrary to popular belief a lot of people do not get 0-1% loans. The average car loan is 4.21%. Average CD for a 25,000 dollar 18 month cd is 2.85.
If all you have is 25k no you dont use all that money to buy a car. But you can buy a solid used car for 4/5k that can be driven for a long time before needing replacement.
When you have the money allocated STRICTLY for a car purchase and buying cash isn’t going to strain any finances. I hear and see the “If your money makes more in a savings type account and if you can get a lower rate get a loan”. . That’s great IF you have such account with all that money and IF you have the credit to qualify for a low low 0-2% loan. Then you can buy in such way.
The problem is a lot of people simply do not have 25/35k+ cash laying around to buy a car. Nor do most people have such credit to qualify for such low rate. Contrary to popular belief a lot of people do not get 0-1% loans. The average car loan is 4.21%. Average CD for a 25,000 dollar 18 month cd is 2.85.
If all you have is 25k no you dont use all that money to buy a car. But you can buy a solid used car for 4/5k that can be driven for a long time before needing replacement.
I actually do have the money set aside for a car purchase (in addition to my other savings such as retirement and emergency fund). I have $20k set aside. Not quite enough for a new car, but plenty for used (which again, is why I am leaning towards used). I hope to actually only spend about $15k of it if I can.
I just checked and was surprised to see my credit score is 820. I thought it was a little lower than that (I was going to say high 700s but decided to just look it up instead). In any case, I should have no problem getting the lowest rate loan available. I'd have to unfreeze my credit I suppose (I never use it, so I froze it after my information was compromised twice, once by Equifax).
I need to look into shopping around to other credit unions. I had a hard time finding a credit union that I could apply to/that would take me/I don't meet their qualifications. You know what's weird, I did a google search for "credit union with best auto loan rates" and my credit union is on the top ten list. But that Bankrate page also says my CU has as low as 2.49% loans for 36 months but I don't see that anywhere on the credit union website. Bankrate just says "car loans" though. So I wonder if they are looking at new car rates. The CU website clearly says as low as 3.49% for used cars.
I would have to find a used car loan for less than 1% to make it worth my wild to finance. I would be ahead about $650 over the course of three years. Any more than that, I am pretty close to breaking even. I have my doubts that I can get a 1% used car loan though.
I actually have a solid used car worth about $5k. It’s my current car. I trust it only because I’ve had it for 15 years and I know it’s well maintained. I’ve considered getting another one just like it used, but the ones I see online look “abused” to say the least. I’d have a hard time trusting a used car like that. I don’t want my teen daughter breaking down and I can’t afford to miss work breaking down either. But if I could find a car that seems to be well maintained I’d be willing to have a mechanic look at it and consider it. But that’s going to be tough. It seems like most people really don’t take care of their cars.
I need to look into shopping around to other credit unions. I had a hard time finding a credit union that I could apply to/that would take me/I don't meet their qualifications. You know what's weird, I did a google search for "credit union with best auto loan rates" and my credit union is on the top ten list. But that Bankrate page also says my CU has as low as 2.49% loans for 36 months but I don't see that anywhere on the credit union website. Bankrate just says "car loans" though. So I wonder if they are looking at new car rates. The CU website clearly says as low as 3.49% for used cars.
Yes, you should shop around, their are better deals out there. My CU offers loans rates a 1.79% for 36 months or less and 2.49% for 66 months or less whether new, used or refinanced.
I far as the financing/cash argument, I say go with the option that gives you the most mental comfort without putting an unnecessary financial strain on yourself.
So a few days ago I started reading a topic in the main Economics forum. It was about why people think the economy is bad. In it, someone mentioned he paid cash for his car and I think just about everyone in the thread told this poster is was not a smart move. I need to go look again but I think literally no one said paying cash was the better financial move and I can't figure out why.
I am looking to buy a car in the next year. I am on the fence with new vs. used. I saved up the cash to buy the new car outright but hope to find a good used one instead to save some money. I just figured I would use cash to buy a car. But that thread got me thinking, is it better to have a car payment? I always come out with “no.” But so many people in that other thread seemed pretty sure (but I don’t think anyone explained why).
I just can't figure out how a payment is better. If you go with a used car, the rates are higher than any interest bearing account. So that makes no sense to me. I had to do more digging with a new car, but it seems that those low rates and 0% rates often come in lieu of cash back or other money saving incentives (to the point where maybe it's a wash). I don't know how true it is, but I read that it can also be harder to haggle down the price of a car when low interest is in the mix. It seems you have better negotiating possibilities (for a lower overall cost) with cash.
In what instance does financing a car make more sense than paying cash?
the answer is that it depends. and there are people that will insist that you lose something when you get a 0% interest rate but that isnt always the case. you have to determine what will give you the best price and if you can finance it for a low enough rate, it probably makes sense to finance it.
i dont particularly care which car i have, i just care about certain features so i will select the car by interest rate deals. if you are more selective in your car; you are going to be more limited.
If you can’t afford to pay cash you’re way too poor to own a car. Take the bus! Americans waste money they simply don’t have to spend because they can’t figure out how to budget. You have people who could afford a $3,000 used car or could save for one, but nope they buy a $25,000 car financed and end up paying $35,000 for it over the life of the lease or whatever it is. In any case not a bright move. Cars are cash items just like furniture. Homes are a different story - at least they appreciate in value. Even then people overspend but that’s another story.
Absurd. Everyone's situation is different and there are many where it makes total sense to finance a car.
Financing my car has allowed me to get to work everyday for the past 4 years. There is no public transit available for me to get from my home to work. Many would suggest moving closer to work, but that is not an option when moving closer to work would triple the cost of housing and property taxes. Even when you factor in the car payment, gas and maintenance, I still come out ahead. It would be great if I could have paid all cash for my car, but I didn't have that cash laying around. And you can't put a price on the peace of mind of having a reliable, comfortable vehicle. I drove cheap beaters paid with cash prior and it was a nightmare maintaining them and trying to get around. Burning vacation days because of a breakdown (could also lead to discipline or job loss) or showing up in the office soaked in sweat because the A/C wasn't working. Nope, I'll finance the car so I have reliable transportation and allows me to get to a job which in turn allows me to build a better financial future for myself. Perhaps I'm being a bit hyperbolic, but your post was silly to say the least.
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