Paying in cash vs. financing?

[TylerLieberman]

I put $0 cash down. But I had positive equity on my wrx so they gave me enough as a trade in plus an additional $1500 and some change. Not to mention the rebates I got and everything else. Because of credit, my interest rate was still 2.99% at 72 months.

[jkonquer]

Just think of it this way.

if you buy a BRZ limited plus tax, you are looking at around $30.000 with $0 down,
With .79% interest and 48 month. you will be paying $500.00 worth of interest in 48 month. Now if you were to get 1.9%, you will end up paying $1210.00 worth of interest in 48 month.
I think its worth to finance the car for .79% and spend the saved up on investing on something else like real state or commodities.
Good invester will tell you best time to invest is when the interests are low. and right now its at its lowest ever. But that's only on investing point of view, if you want less headache, just purchase it.

Also one thing to consider, since you are just getting out of the college, financing the car would help your credit a lot.

[Foobar]

Basically - if you can be diligent enough to invest the money in something other than a big bank's basic savings account, you'll likely do better than a 0.74% return. Finance it.

If you have any oustanding credit card debt or personal loans, they are probably hitting you for well over 15-20% APR and are likely compounded, so take your money and pay those debts off first while you finance the car at 0.74%.

If you need liquid assets for something like an upcoming mortgage downpayment - keep the cash, finance it.

If you need to build up some credit history, finance it.

If you don't think you'd beable to invest the money in something, or if you don't need the cash on hand for anything, pay for the car up front.

[AznBRZer]

.74%? I thought I did good at 2.24%!

At .74%, I would finance at the longest term I could and throw any extra money in a Roth. No need to throw money on a depreciating asset unless your wallet is burning a hole in your wallet.

[suaveflooder]

Originally Posted by Mitch

Jesus. Did you finance over 12 months with no money down?

lol, I'm just pretty against not paying cash for anything right now. I'm actually 100% on the opposite spectrum than most people. I read one financial book that says "pay cash for everything." Then I hear about an article that polled wealthy people and they were asked how to become wealthy and a lot of them mentioned, becoming and staying debt free. I don't know, I am paying that much because I don't want to owe money on anything right now. I feel I made a stupid decision, buying a new car in the first place, and financing a car secondly. I should have the car paid off in a year to a year and a half or so max.

I don't feel there is anything wrong with what those above are saying about investing the money and financing, but I think a little differently. I just KNOW that most people won't invest that money even though it is GREAT advice, they will put it toward mods on a depreciating asset.

Edit: Just read @Foobars post. LOVE IT! Good advice!

[Kelbyat07]

Originally Posted by shirker

Just realized I forgot leasing as an option...oops.


PenFed (Pentagon Federal CU) offers a 0.74% rate on new cars bought through their free "car buying service" that are financed for 48 months or less


Don't mind at all - just a dollar shy of $380 in total interest

Damn thats really good

[AznBRZer]

Originally Posted by suaveflooder

lol, I'm just pretty against not paying cash for anything right now. I'm actually 100% on the opposite spectrum than most people. I read one financial book that says "pay cash for everything." Then I hear about an article that polled wealthy people and they were asked how to become wealthy and a lot of them mentioned, becoming and staying debt free. I don't know, I am paying that much because I don't want to owe money on anything right now. I feel I made a stupid decision, buying a new car in the first place, and financing a car secondly. I should have the car paid off in a year to a year and a half or so max.

I don't feel there is anything wrong with what those above are saying about investing the money and financing, but I think a little differently. I just KNOW that most people won't invest that money even though it is GREAT advice, they will put it toward mods on a depreciating asset.

Edit: Just read @Foobars post. LOVE IT! Good advice!

Whoever said that is full of crap. A vast majority of people don't have the resources to leverage the amount of capital needed to become wealthy to begin with.

I hear you about the mods thing though. I'm older and use it as a DD, so mods are worthless to me.

[suaveflooder]

Originally Posted by AznBRZer

Whoever said that is full of crap. A vast majority of people don't have the resources to leverage the amount of capital needed to become wealthy to begin with.

I hear you about the mods thing though. I'm older and use it as a DD, so mods are worthless to me.

lol, I wouldn't go that far. He's worth 55 million.

I kind of go by the philosophy of being a copy cat. If I see certain mods making a car faster at autox or open tracking, I want those mods. Granted, most of the driving is going to be experience, but mods will help, and proven mods are a good thing.

Likewise, if I see someone successful, I'm going to copy him. Most of the success of failure is going to come with ACTION on MY part, but mimicking his/her "plan" when it's worked for many people is not a bad way to start IMHO.

[LeeMaster]

Originally Posted by suaveflooder

lol, I'm just pretty against not paying cash for anything right now. I'm actually 100% on the opposite spectrum than most people. I read one financial book that says "pay cash for everything." Then I hear about an article that polled wealthy people and they were asked how to become wealthy and a lot of them mentioned, becoming and staying debt free. I don't know, I am paying that much because I don't want to owe money on anything right now. I feel I made a stupid decision, buying a new car in the first place, and financing a car secondly. I should have the car paid off in a year to a year and a half or so max.

I don't feel there is anything wrong with what those above are saying about investing the money and financing, but I think a little differently. I just KNOW that most people won't invest that money even though it is GREAT advice, they will put it toward mods on a depreciating asset.

Edit: Just read @Foobars post. LOVE IT! Good advice!

There are good debts out there that will put money in your pocket. Just because it is called a debt does not mean it's bad. I dont know where this poll was taken place at, or if it was a middle class/poor class poll, but most of the rich people used debt to make money. Just like the Wilf family who currently owns the Minnesota Vikings franchise through their real estate that was initially bought with a huge amount of debt that ended up being paid off a few years down the road.

[suaveflooder]

Originally Posted by LeeMaster

There are good debts out there that will put money in your pocket. Just because it is called a debt does not mean it's bad. I dont know where this poll was taken place at, or if it was a middle class/poor class poll, but most of the rich people used debt to make money. Just like the Wilf family who currently owns the Minnesota Vikings franchise through their real estate that was initially bought with a huge amount of debt that ended up being paid off a few years down the road.

I've heard this idea many times. I just happen to not agree with it. I plan on being wealthy without having debt. Once, I'm out, that's it for me. No more loans for anything.

[mav1178]

There's a huge difference between rich and wealthy.

Anyone that is adverse towards the word "debt" needs to evaluate his/her (mis)conception in the proper context. If you take on debt to finance a future growth improvement/potential (student loans are a good personal example), then that is a good debt.

If you take on debt to buy something you can't afford (i.e. a house when you're overleveraged on your finances), then you're taking on a bad debt.

There's too many examples and scenarios to line it up, but for the actual post about financing vs cash: ultimately what is your money worth to you?

If you aren't going to invest the money, buy it outright. If you have the means to invest it, invest it and take the financing on the car.

Just because it works for me, doesn't mean it necessarily works for you.

-alex

[shirker]

Originally Posted by rmjjensen

DO NOT PAY CASH! DO NOT DO NOT DO NOT - it is completely foolish right now.

Originally Posted by jkonquer

Also one thing to consider, since you are just getting out of the college, financing the car would help your credit a lot.

Originally Posted by Foobar

Basically - if you can be diligent enough to invest the money in something other than a big bank's basic savings account, you'll likely do better than a 0.74% return. Finance it.

If you have any oustanding credit card debt or personal loans...pay those debts off first while you finance the car at 0.74%.

If you need liquid assets for something like an upcoming mortgage downpayment - keep the cash, finance it.

If you need to build up some credit history, finance it.

If you don't think you'd beable to invest the money in something, or if you don't need the cash on hand for anything, pay for the car up front.

Duly noted to all above points, I appreciate the advice guys. I already took into consideration/planned everything from maxing out my roth IRA and making 401k contributions when I start work, to growing my stock portfolio, to aiming for an 800+ fico (which the auto loan directly helps with). BUT, it absolutely never hurts to hear others reaffirm those points, especially when it could benefit others too.

[shirker]

Originally Posted by AznBRZer

Whoever said that is full of crap. A vast majority of people don't have the resources to leverage the amount of capital needed to become wealthy to begin with.

I hear you about the mods thing though. I'm older and use it as a DD, so mods are worthless to me.

Hear, hear. Couldn't agree more on both points... 1) you need big money to make bigger money. 2) this too will be my DD in the foreseeable future, plan on running it into the ground or until circumstances change and I need a more "practical" car

[jlu]

Originally Posted by mav1178

There's a huge difference between rich and wealthy.

Anyone that is adverse towards the word "debt" needs to evaluate his/her (mis)conception in the proper context. If you take on debt to finance a future growth improvement/potential (student loans are a good personal example), then that is a good debt.

If you take on debt to buy something you can't afford (i.e. a house when you're overleveraged on your finances), then you're taking on a bad debt.

There's too many examples and scenarios to line it up, but for the actual post about financing vs cash: ultimately what is your money worth to you?

If you aren't going to invest the money, buy it outright. If you have the means to invest it, invest it and take the financing on the car.

Just because it works for me, doesn't mean it necessarily works for you.

-alex

This.

In this particular example, if you're getting a rate of 1% on your financing and can take the cash and put it in an investment giving you 2% after tax, you are saving money by actually NOT paying cash. There's no shame or stigma to debt if you do the proper research and planning to make sure you can afford it (or even profit off of it).