paying cash vs financing

[ft86fanatic76]

Originally Posted by FRSCoupe

If I pay cash do I bypass the finance department and their BS trying to sell options I don't need..

Do dealers actually prefer cash or finance to close the deal? I heard with financing they also make a bit of finders fee or something.

So if I say I am buying, I don't need financing, is this an advantage to get a better deal? (buying a car in general)

i GUARANTEE you that you will be much better off paying it off 100% on the same day. you will get a better deal because dealers want the money really bad. they will rip you off BIG time if you finance or lease. dealers are struggling in this economy because people are jobless and they arent going to buy a new car. here is what you should do: find a good dealership online, and take your checkbook with you too. when you find the car, calculate the invoice price, and demand that you have the cash on hand and that you are going to pay it off. dont even move your price target even if the salesman said he cant do it. simply walk up and leave. tell them: good luck finding someone in this economy who is going to pay it off in cash. i promise you they wont let you leave. however, there is a chance that you have to visit a couple dealerships in order to get the best deal. ive done this with ALL of my cars, parents too, and gotten invoice price.

[EBrake]

Unless the dealership is offering an incentive like an extended warranty (doubtful), you get the same deal either way. Scion has pure pricing and the dealership gets $25k regardless of what you do. Financing is just a service they provide... unless it's a special incentive, it's probably not worth it IMO if you have the option to just pay it off.

[frs23]

Originally Posted by gwascopter

heard mexico is actually buying spain and have the name changed to OLD MEXICO

They'll have a better soccer team then and could claim Euro12

[ihaskrayon]

What I would do if I had that much in the bank: I would take financing and pay it off in large amounts. If you take a 1.9% deal and pay it off in less than a year your credit will sky rocket. Just take 60mo loan and pay it off in 5mo with 5k each payment. That way you still have money in the bank for an emergency fund

[EBrake]

Originally Posted by ihaskrayon

What I would do if I had that much in the bank: I would take financing and pay it off in large amounts. If you take a 1.9% deal and pay it off in less than a year your credit will sky rocket. Just take 60mo loan and pay it off in 5mo with 5k each payment. That way you still have money in the bank for an emergency fund

Credit doesn't work like that. It doesn't care how much your payments are or how much extra you pay. It just cares if you made the payment this month or not. Meaning if you had a $250 payment, and paid $500 this month and nothing next month, your credit would tank and you would retroactively have to pay a higher penalty interest rate. This also means paying $250 for 5 years would have a better effect on your credit score than paying it all off in a few months.

You could always pay off a certain amount and renegotiate your payments to be lower though.

[FRSCoupe]

Thanks for the advice.


Can you tell me how do I pay cash exactly without running the the bank to get a cashiers check in the middle of the transaction?

The reason I need to pay cash is because I am in the middle of a mortage refi (looong process) and I do not want to start a new credit or even get a inquiry on my credit right now.

Most of the cash will come from the vehicle I just sold.

[Dadhawk]

Originally Posted by FRSCoupe

Thanks for the advice.


Can you tell me how do I pay cash exactly without running the the bank to get a cashiers check in the middle of the transaction?

The reason I need to pay cash is because I am in the middle of a mortage refi (looong process) and I do not want to start a new credit or even get a inquiry on my credit right now.

Most of the cash will come from the vehicle I just sold.

Most dealers will run an electronic check (they process your regular check while you are sitting there). Really, its no different than when they finance and let you drive off the lot with the car. They don't really have their money yet.

You can also just ask them how they would like to handle the transaction up front, as it may vary between dealers. For example, the dealer I bought mine through would not take cash for the down-payment to hold the car. They would only take a check or credit card because they didn't want to have that much cash on site.

[thill]

Originally Posted by EBrake

Credit doesn't work like that. It doesn't care how much your payments are or how much extra you pay. It just cares if you made the payment this month or not. Meaning if you had a $250 payment, and paid $500 this month and nothing next month, your credit would tank and you would retroactively have to pay a higher penalty interest rate. This also means paying $250 for 5 years would have a better effect on your credit score than paying it all off in a few months.

You could always pay off a certain amount and renegotiate your payments to be lower though.

That is not true. When you apply for a mortgage, or want to refinance your home, lenders 100% look at your loan history, whether you made payments on time, whether or not the loan was paid in full or is still outstanding, and how long your loan terms are. If you have a 72 month car loan and have only paid 6 months that is taken into consideration vs someone who has no car loan.

At least two years ago they scrutinized my loan history and I have excellent credit and lots of cash on hand and in investments.

[Ess Vee]

I'd rather take a loan out on the car, put the rest into a home using FHA and rent it out... the profit right there is the car payment... and income after it's paid off in 72 months.

Not to mention the house would appreciate in value in this market.

If you come out on top over the interest rates offered to you by banks, then it's kind of a no brainer?

Either it makes sense, or it doesn't.

Banks make money on lending money away. In order for them to have money in the first place, they need to offer interest rates to people who deposit money into their banks.

If you don't want to worry about having to make payment (becoming a slave to the financial system), by all means, pay it off outright. You won't have to babysit your funds then.

[thill]

Originally Posted by Ess Vee

I'd rather take a loan out on the car, put the rest into a home using FHA and rent it out... the profit right there is the car payment... and income after it's paid off in 72 months.

Not to mention the house would appreciate in value in this market.

If you come out on top over the interest rates offered to you by banks, then it's kind of a no brainer?

Either it makes sense, or it doesn't.

Banks make money on lending money away. In order for them to have money in the first place, they need to offer interest rates to people who deposit money into their banks.

If you don't want to worry about having to make payment (becoming a slave to the financial system), by all means, pay it off outright. You won't have to babysit your funds then.

In the past, I would have agreed with you. From 2007 to 2009 all bets are off. Looking at the current economy, I just don't think there are guarantees anymore for most traditional investments including housing, mutual funds, stock market, etc will generate a positive return.

I consider the majority of investments to be gambles. I can't tell you how many people I know over the past 6 years or so that took out home equity loans, big car loans, etc and invested in what was considered safe investments and lost their shirts. Look at places like Arizona, Florida, California, etc where people took out massive loans for rental properties or flips and lost everything.

I don't buy that we are completely out of the weeds. Europe is a mess. Unemployement is still high. Health insurance has some huge question marks. A huge percentage of Americans owe more on their house than it is worth. And our country seems to have no answer for the amount of debt we are taking on and how to pay it back. Hint. Taxing just the rich aint gonna even put a dent in our debt, so as usual, the middle class will carry the burden.

[Dadhawk]

Originally Posted by Ess Vee

I'd rather take a loan out on the car, put the rest into a home using FHA and rent it out... the profit right there is the car payment... and income after it's paid off in 72 months.

Not to mention the house would appreciate in value in this market.

If you come out on top over the interest rates offered to you by banks, then it's kind of a no brainer?

Either it makes sense, or it doesn't.
....

What you are not taking into account (or at least not mentioning) is Risk.

In your scenario you are doing two things that create risk. First, you are taking out a loan that requires repayment. At the same time, you are assuming that the home you purchase will appreciate (we all have learned in the past several years there is no guarantee of that at least over 5 years), and you are taking on a even larger amount of risk by taking a loan on the home since you mention FHA.

On the other hand, if you pay cash for your car, you are "out the money" and any differential you could have profited (note that is not the same as "earned") from the investment. Don't forget to include costs for such things as taxes, interest on both loans, etc in figuring out what you really "earned".

The only risk you have with the paid off car is that if you run into a situation where you need money from the car, you must sell it probably at a wholesale or slightly higher value for a quick sale.

Just food for thought.

[Erroneous]

Originally Posted by Dadhawk

What you are not taking into account (or at least not mentioning) is Risk.

In your scenario you are doing two things that create risk. First, you are taking out a loan that requires repayment. At the same time, you are assuming that the home you purchase will appreciate (we all have learned in the past several years there is no guarantee of that at least over 5 years), and you are taking on a even larger amount of risk by taking a loan on the home since you mention FHA.

On the other hand, if you pay cash for your car, you are "out the money" and any differential you could have profited (note that is not the same as "earned") from the investment. Don't forget to include costs for such things as taxes, interest on both loans, etc in figuring out what you really "earned".

The only risk you have with the paid off car is that if you run into a situation where you need money from the car, you must sell it probably at a wholesale or slightly higher value for a quick sale.

Just food for thought.

Hopefully he's renting out a property that's cash-flow positive and not counting on the appreciation, which would just be a bonus.

[Dadhawk]

Originally Posted by Erroneous

Hopefully he's renting out a property that's cash-flow positive and not counting on the appreciation, which would just be a bonus.

Understand, but that in itself has several different facets of risk to it.

Again, I'm not saying its a "bad" idea, its just not a no-brainer.

[Ess Vee]

Originally Posted by Erroneous

Hopefully he's renting out a property that's cash-flow positive and not counting on the appreciation, which would just be a bonus.

Yeah, I would just count any appreciation as a bonus. Thanks for the different perspective, guys!