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I knew a man many years ago who had never used credit to buy anything.
He got married late in life, and they wanted to get a new car. It his wife had to do the financing, because he didn't have good credit, he didn't have bad credit, he had NO credit rating at all! According to the credit reporting companies, he did not exist!
So, yes, establishing a good credit history by financing a vehicle CAN be a good thing!
In a case like that, though, where the borrower has no credit history, not much chance of getting a car loan without a co-signer; at least not at a reasonable interest rate. He would probably have to start out like a young adult just getting started in their career, opening small revolving charge accounts with merchants, paying on time, then apply for a major credit card, then apply for loans after becoming "established".
Much like the young person just starting out, who needs the backing of their parents, I think this man would need to do the same with his new wife.
If you can get 0% interest, why not financing? Usually if your credit score is above 730, the dealer will offer you 0% as they advertise.
Then you can save that lump sum, and deposit in some low-risk investment that at least yields 2-3%. In the mean time, you build up your credit history (credit history is based on various kinds of loans which you pay back punctually).
And of course, if you buy new car, you opt for full insurance coverage. Do you mean you can afford a new car but skip comprehensive and collision?
If you are going to get full coverage anyways the low interest rate may well be lower than what you can make on investments. If you do not want full coverage, and have cash, pay cash.
this is easy..NONE, no pros to financing anything.
Please explain. Why would you not finance when you can borrow money for free or the interest rate on the loan is lower than the interest you're earning on the money? Unless you keep your cash in your mattress, have poor investment skills, or bad credit, financing almost always makes more sense than paying cash. The math on this is so fundamental, I'm amazed that people still cling to the "never finance anything" mantra.
I doubt an engine rebuild will cost more than a grand or possibly two on most cars. What was wrong with paying cash for my slightly-used car and still having $30k liquid? What personal loan?
A head gasket might cost a grand or possibly two on most vehicles.
A complete rebuild on a modern engine? Three to four thousand on a good day.
Just the rebuild kit for my piddly little 2.8 4 cylinder is $400.. And that doesn't include the timing chain or oil pump.. Both of which you'd replace when rebuilding the engine.
Folks doing rebuilds can speak more to specifics.. but.. You're way off on your numbers. I might still be way low at $3-4k.
Please explain. Why would you not finance when you can borrow money for free or the interest rate on the loan is lower than the interest you're earning on the money? Unless you keep your cash in your mattress, have poor investment skills, or bad credit, financing almost always makes more sense than paying cash. The math on this is so fundamental, I'm amazed that people still cling to the "never finance anything" mantra.
If you are offered 0% interest financing, and there is no additional discount or incentive available for a cash sale, then by all means, go with the interest-free financing. But understand, there is no such thing as an "interest-free" loan. IOW, the financing cost is factored into the price you are paying, somehow. Most of the new-car 0% financing deals are going to be in lieu of a cash rebate/additional discount applied to the vehicle sale price. I haven't run across any 0% deals for used cars.
Another element you need to factor in (which most sample formulas do not), is the money you would not be allocating to monthly payments, if you pay cash instead. If you invest that amount every month, instead of spending it on something else, does the financing deal still look better over the course of the loan?
I got one once. Got one of those checks the credit card companies send out that had no fees whatsoever.
Usually there's a 2% or more fee (depends on how long you get 0%), but this one had zero, zip, nada.
Only a fool would not take that money. I bought a used Chevy Tahoe with it.
Used their free money (except for making small payments), for a year, then paid it off.
Otherwise I can get sub-2% on a used car anytime as long as it's not too old.
I've bought new cars and trucks with cash 6 times and financed 6 cars, two that were leased. Ive financed from 50-100%. IMO, paying cash was not as beneficial as you would think. Sure I had a new car and no monthly payments, but when manufacturers offer 0% financing up to 3% it's almost stupid to not finance the car and invest the money instead.of course this isn't the case if you don't have great credit.
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