Purchasing with Cash or Financing
 

What are the pros and cons? I could pay cash but plan to buy a house soon. I figured with a bigger down payment I will be better off and then I can just pay off the car down the line with my mortgage.

Thoughts? Thanks!

:word:

You should speak with a financial adviser.

-alex

The pros and cons depends on what you do with the money when you finance, how much the interest is, etc. So I don't think someone online can really tell you that since we really don't know what you do with your money.

At 2% rate, my money is better off in the market.

If you can afford to do cash, you're not buying the most expensive car you can afford. Step up to an M4 or a Porsche!

/First world problems

I had enough to pay cash, but did 66% down payment, financed the remaining 33% thru my bank and had it auto withdraw from an account with the money already set aside. Builds credit history and is basically paid off. Also made sure I had a no early payment fee so I could just finish off the payments after 12-18 months instead of the 3 year plan.

I got a 1.45% loan at my credit union. With an interest rate that low, it didn't make any sense not to finance. I kept my cash for other projects, and now I'm able to rebuild my Jeep for the places the BRZ can't go.

Place most of your money into the down payment on the house. the house is an appreciating asset. your money will grow with the rising equity in your house and your interest on your mortgage is tax deductible. the car is a depreciating asset. get a good low interest loan under 2%. Penfed.org is a good place to get a loan.

This.

Not to mention that mortgage rates are still pretty low, so it's still a good time to lock in a low rate and pay it off with less valuable money later. If paying cash for the car now delays the purchase of a home, you will likely pay a higher mortgage interest rate when you finally do buy one.

Put down 5% or whatever the minimum is, wait for the market to flatten out, pull some cash out and pay to whatever you feel comfortable with.


Ahh it sounds so easy in theory.

That's debatable..

Long term real-estate is generally considered a safe investment.

Buying at the top of the bubble with an adjustable rate mortgage is not a safe investment.

Things have been on their way back up. Couple years ago I got the place i'm in now for about the price of a nice car thanks to the crash. It will eventually clear at least 100k profit.

See Post #2

/thread

My own personal philosophy though as far as cars is to finance as little as possible and pay the loan down as fast as possible. The bank makes money and you lose money the more you finance and the slower you pay it off.

On the house, put enough down to get affordable payments and a low rate, avoid anything adjustable if possible (I didn't but was able to refi).

Real estate recently has been iffy as far as appreciating, but as long as you get into a loan you can afford for the long haul, history says it will eventually gain value. (We were underwater for several years, but affording things fine, now probably close to even.)

Another thing to consider... the sooner you pay down 20% on your mortgage the sooner you don't have to pay mortgage insurance.

Yes, you should take on the maximum amount of debt the banks will allow. It worked so well in 2007...

Bear in mind that if you decide to finance the car before you buy the house it may lower the amount you can qualify for to buy a house. I would buy the house first and then buy the car. It is also a good idea to have some cash reserves after buying any house. You will be amazed at the expenses you will incur even with a brand new house.

This. I should have moved out before buying my BRZ but yolo :burnrubber:

Picking up Monogram on Monday! Meeting with the bank today.

:iono:

Things will be great...

:D
:burnrubber:

Buy your house first. Live in it a while. Then buy the car. Houses always cost more than you think and the more you put down the better especially if you can avoid PMI and a higher interest rate.

I think you'd need to compare what your interest rate would be on a car loan and on your mortgage (also factor in PMI, as others noted).

Go with the route that has less interest. For example, if you could get a 0% interest rate on your car loan, it'd be better to maximize your car loan and dump that money into the downpayment on your house.

Not sure why everyone is freaking out about buying the house first... After moving back to the US from working overseas I had to buy two cars and a house! (Cars came first to get to work and to search for new house.) Didn't have any issues buying any of those and they were all within a few weeks of each other!

LESSON: If you take care of your credit it will be there when its needed.

Buying a twin is not a sensible choice when you want to buy a house also if your finances are impeccable.

Buying 2 beaters and a house is a lot cheaper than a twin lol

Go with your instinct. I always prefer paying my mortgage before car. Because I eat, make Love, host party, park my car, work, raise kids, sleep, relax, entertainments in it. Cars, it is only to have some stupid moments here and there, which may last 30 seconds to several minutes max, and may be a few times of hot performance laps once in a while

Replying to the thread title, not the banter in the thread...

"Purchasing with Cash or Financing"

Here's the pros and cons in my book, throwing everything else out the window (I can live in a car, can't drive my house... well unless its an RV :D)

Pros of Purchasing with Cash

- No car payment!
- No car payment!
- No, really, read above - no car payment!
- You 100% own the car, no credit/loan hassles
- No paying thousands and thousands in interest charges (even at 3% interest you're still paying at least $2000 on a brand new car over 5 years - and I'm pretty sure if you're posting this question you won't fall into the 3% category, I should know ;))

Pros of Financing

- Can enjoy the car now, not later
- Can put the money towards other things that *could* be investments/returns (negligable with higher interest)


Your choice in the end :)

I don't know how I missed this, I agree wholehartedly.

If you stay in long enough , otherwise short term can hurt you..
Too many variables and complexity for this thread ..

Really it all comes down to interest rates IMO. I was in a similar position but getting a sub 2% interest rate on the car put me in a position where it was better to not put any money down. To put it in perspective I've invested that 26k and in less than a year made 18-20% on it. Yes there's a little risk involved in this but it's one you're more likely to come out ahead in.

See what interest rates you can dig up and decide from there.

Is there a reason why people call a dealership the stealership...?
I ended up putting 50% cash down-payment. So I will own half right away.
This gave me the best payment amount and I should be able to have the car paid off fairly quickly.

My only issue is, that after adding the total protection package, 5 year ECP, detailing package and taxes, the price ended up being way more than I expected.

So much for approximately $26,000 CAD

How much did everyone else pay for their Monogram in Canadian funds? :cry:
Mind you, I did get fully loaded.

:happyanim:

At 2% interest rates with good credit, there's really no need to tie a large sum of cash on a car. You can do a 30% down payment and comfortably pay it off over 5 years. If needed, you can close on the loan earlier without a problem.

Put the money into a house.

This was not possible as the payments were way too high for me!

:mad0259:

I was in the same predicament as you for a while, and was just working/driving my beater around while I researched the car/financing etc. I now have enough saved in cash to just flat out buy the car, but I didn't pull the trigger because then I couldn't get over the price difference between U.S/Canada. I'm a dual citizen new transplant to Canada (fuck the prices here btw), and I find the arbitrary price difference to be an insult. Now that the Canadian dollar is a good 10% lower I'm more comfortable with buying in Canada as opposed to jumping the border to do it.

Ok that was an unnecessary tangent. I was planning to pay for the car in Cash, but it's a lot of cash. I found a great middle ground and my parents have agreed to loan me the rest (whatever down I want to put) with 0%. Now I can use the extra money to buy the mutual funds/stocks I wanted to invest in, while keeping the money in the family. Note that even with low financing via bank/dealer they will include a charge to finance, which, last I looked was over $1000 as well.

Too many dealer fees I say! They need to change the legislation.
What about just financing the whole thing and just deal with the approx $615.00 per month car payment?

Maybe this is the better way to go and then I can better hold onto my investment and pay off my car within five years or less when I go to buy a house using my Mortgage & Homeline Plan. I spoke to the bank and they said every dollar counts towards your down payment and how much you can borrow...Even if you have a car payment etc. Better to have more of a down payment and car payment, as a car depreciates they said.

My bank could not beat the dealers 3.99%

:( I might have to try Coast Capital. Although, this is a credit union... Hmmm. Risky?

Shoot, they are closed on Sunday. Hmmm, I can always shop around after the fact and if I find a lower rate somewhere, I can just pay out the loan with the loan from another bank...

LOL. My total interest over the life of my loan is $817. My insurance premiums cost more than that.

Why would a credit union be risky? They usually have much better rates than commercial banks and are usually not out to screw their customers with fees. If they are lending you money to buy a car, they are the ones taking the risk.

As I mentioned earlier, I went through a local credit union and got a 4 year loan at 1.5%. There were no unexpected fees. I wasn't even a member before the loan. I just had to put up $10 to open a savings account to become one. The funny thing is that I found them because they advertised their 1.5% rate on one of those slides that run in movie theaters before the movie.

There are still good interest rates to be had if you shop around and include credit unions in your shopping. The loan officers are more than happy to talk with you even if you're not a member.

Furthermore, when you pay back a loan over time, because of inflation you're actually paying it back with cheaper dollars. Think about it. If we have inflation of 2% per year, each year the lender is receiving dollars that are worth 2% less. By the 5th year of a loan, the dollars have lost almost 8% of their value. If your income keeps pace with inflation, it becomes easier as time goes by to pay off the loan.

The cost of my own loan is almost all inflation premium. The credit union is making almost no money off of me.

Thanks! I will shop around. I thought 3.99% was high. But as I take delivery on Monday I will have to decide whether or not to put a down payment. I would rather put nothing down and pay a much lower interest rate...

You have got it made!

I put 15k down on mine and got $230 a month payments with a horrible interest rate...

I would keep the cash or put it towards the house
Keeping the cash is my first option cause ull have back up money if shit hits the fan

Do you know what sort of rates Coast Capital offers
I may have to stop there on the way to the dealership, to see what they can do...Usually they can beat everywhere else. I would be sitting pretty if I could get like 1.5% and finance the whole thing.

:bellyroll:

Learn the difference between "Wants" and "Needs"

Get your priorities in order and pay off the house as much and as fast as possible. The FRS is a TOY that you want. Toys are bought with surplus cash that is just sitting around doing nothing.

While I am of the opinion that "houses are an investment" is the biggest scam ever pulled on a group of people, you do NEED to live somewhere. Mortgages are also made to screw you out of as much money as possible over a long time. Anything you do to shorten the time means you get less screwed by the bank.



Having said all that, if you NEED to buy a new car, then the FRS is not a bad financial choice in that it is cheap and so far, not too expensive to own.

Is it possible to save more on interest like when purchasing a home to pay bi-weekly or weekly through car financing??? (I see on Scion.ca there is a bi-weekly option)

Also, can you not have autowithdrawl on your VISA card? The dealer said in Canada, void cheque withdrawal only.

:iono: