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Since when do you not get a warranty if you buy a new car with cash?
It seems to me that there is a difference when paying cash. You're not paying interest when you do that. That can be a big difference over time. I do agree though, that it's usually still costing you money every month whichever way you decide to pay for it.
You may pay interest on the loan, but what's that rate compared to the rate of return you could get on investing the cash you would otherwise sink into the car?
What happens when your car needs a repair out of warranty and you end up with a $700 bill on top of the $200-$500 monthly payment?
Same as if your old car needs a $700 repair and you're setting aside $200-500 for a replacement car. You're out $700 extra. And you put off getting the replacement car for a while, while you make monthly payments to your savings account to replenish it.
If you're leasing, you never have an out of warranty repair.
And you can get lease deals like this $46/mo deal with no money down:
I spend more than that on the internet to get here to post...
The point is, saving up for a car is the same monthly payment as making a loan/lease payment, you just don't have the car yet. And while you CAN skip a month, you also put off getting that car you might need a little longer. So if you're serious about getting a car with cash (and think how long you have to save up to get a NEW car with cash) you don't skip months, and you still end up with a monthly payment. It's just that your monthly payment is going into the car savings account instead of to the lender.
You may pay interest on the loan, but what's that rate compared to the rate of return you could get on investing the cash you would otherwise sink into the car?
I agree with you that you may be able to get a better return by investing, but that wasn't part of what the other post said.
I agree with you that you may be able to get a better return by investing, but that wasn't part of what the other post said.
Also, I'd rather have money in savings for emergencies than tying up my saved cash on a car. It's better to have a low, fixed monthly cost to budget for than tie up your savings and suddenly need the cash that you no longer have because you spent it all on a car.
And in response to the "what if you are making a monthly payment and you need to make a $700 repair out of warranty?" Another what if question to ask is, what if you just blew your savings on a used car out of warranty and IT immediately needs a sudden repair?
You can what if scenarios all day long, but the fact remains, a budget with a low fixed cost is easier/better to manage than tying up all your cash in a depreciating asset, and then saving up for it's replacement.
I think he has fantastic advice about debt and mortgages, but I actually disagree with this car buying piece.
My husband and I are in our mid-twenties, and when we married we were both still driving our high school cars. His truck is in decent shape, but when I went to trade in my car I wanted a safe, family-friendly SUV and not something that required maintenance.
We got a small SUV and negotiated it to 20K. We put 10K down and are paying the rest at 0.9% for 3 years. The interest is low enough that I don't feel ridiculous making payments, and I didn't want to dip into (er, basically deplete) my savings when you could finance at 0.9. Yes, paying 8% for six years would not be wise, but I think paying cash for cars is often unrealistic.
I guess it's a matter of knowing what you can afford and making good decisions. Not everything that works for them will work for you.
Also, I'd rather have money in savings for emergencies than tying up my saved cash on a car. It's better to have a low, fixed monthly cost to budget for than tie up your savings and suddenly need the cash that you no longer have because you spent it all on a car.
And in response to the "what if you are making a monthly payment and you need to make a $700 repair out of warranty?" Another what if question to ask is, what if you just blew your savings on a used car out of warranty and IT immediately needs a sudden repair?
You can what if scenarios all day long, but the fact remains, a budget with a low fixed cost is easier/better to manage than tying up all your cash in a depreciating asset, and then saving up for it's replacement.
Buying a car cash works for those who have bad credit and can't be approved for a loan/lease or have bad money management skills. Me personally, I'd rather take that bulk of cash and invest it while taking out a low interest loan on a vehicle. Let my money work for me and pay off the car over time.
I currently lease a 2014 Civic Ex. Drove it off the lot for $0 down and pay $229/month. Free oil changes, roadside assistance, etc. When my lease is up in another 16 months, I'll swap it out for another one. It works for me and doesn't hurt my pockets. Most importantly I'll always have a vehicle covered under warranty and not have to dish out for big ticket repairs such as tranny failure!
Depreciation isn't even close with Japanese cars compared to American.
Ummm Yes it is. lol.
Most cars lose about 20% their first year and 15% each year after that.
Now you might find a few specific models that edge closer to 15% the first year but by and large my numbers will be accurate regardless if its domestic, japanese, or euro.
Find me any common car that defies that. Be warned, I have already asked this about 3 or 4 times on different threads dealing with used car prices and so far nobody has.
Most cars lose about 20% their first year and 15% each year after that.
Now you might find a few specific models that edge closer to 15% the first year but by and large my numbers will be accurate regardless if its domestic, japanese, or euro.
Find me any common car that defies that. Be warned, I have already asked this about 3 or 4 times on different threads dealing with used car prices and so far nobody has.
I was talking long term, If anyone is buying new you'd better know you're losing right away or you shouldn't buy new. 5 years down the road the depreciation is drastic between Japanese and American.
5 years down the road the depreciation is drastic between Japanese and American.
No its not. Give me a couple examples and prove it.
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