Buying A Car With Cash Smart Or Not? — Money Matter and…

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Buying A Car With Cash: Or Not?

by golbguru on July 18,

I am pushing my next post in the car buying tips series part 1 and part 2 here) to in order to squeeze this one in.

We bought a 2005 Toyota with 21 K miles on it. Earlier, I did not the price, but it will be relevant so let me say that we paid about as the drive-out price [drive out = final price after and other fees]

We had the option of the used car at about 7.0% but we still chose to go ahead paying cash for it (a decision I now question. sort of).

One of the important reasons for the cash was my almost-all-cash portfolio. The cash has sitting there in high-yield accounts, but it hasn’t been in the stock market. So, although I been making the cash for me — it’s not realizing maximum potential (which it have realized if it was invested Anyways, all that cash there made me think “ heck, if I have the cash, why go for the loan? “. Plus, paying would be totally hassle-free, further encouraged the decision. in retrospection, I am not convinced that it was a decision. I think we totally the leverage aspect of the loan. are a few thoughts on the subject.

Paying Cash

To the casual observer, not a car loan may seem to be the * smart * to do — because you won’t be a dime to the bank in the form of on your car loan . So if you car costs $X, you pay $X and the deal is done.

But one has to keep in that, in doing so, you will be the earning potential of the cash (in our we are going to lose the interest it was through the online savings

Let’s run some basic (crude approximations), include the of lost interest, and see how much in cash will cost us the next four years would have been our term).

Cash paid:

Car loan interest costs: $0

lost on cash (48 months @ APR): $2790

Total of the car: $14,990

Plus, with cash has a few psychological like not having to worry paying additional monthly not being “under debt”,

Paying With Auto

On the other extreme, if we had availed the car @ 7.0% APR, our numbers have been:

Cash $0

Car loan interest costs + (48 months @ 7.0% APR):

Interest received on the unspent (48 months @ 5.15% APR): $2790

[read TFB’s below — I knew was amiss ]

Total cost of the $14,022

What. what here? I am definitely missing How does the car loan come out to be in the long run?

Well, is one flaw in the above calculation it’s in the assumption that the $12,200 is available for earning in savings accounts. You have to that you are paying off the car loan monthly payments of about from the unspent $12,200 So each year, your reserve goes down, and so the interest earned on it. But even if you the extreme scenario in which you earn any interest on the unspent the total cost of the car still to about $14,022 — still cheaper than the option. You could probably for taxes in the first scenario and way it won’t make too much of a (in our particular case). But, if you are say 8%+ return on your money in the market, going for a used car (typically around 6

7%) might be the option for you, instead of cash

or that’s how I am figuring it

Of course, now that we have cash, we won’t have the feeling of being under (in a Dave Ramsey style), but I am not if that’s worth about over the next four

Btw, if you don’t consider the of lost interest/returns, then it is that paying cash is a choice; but we are sort of going that thinking in this

What do you have to say about am I doing the right thing in the cost of lost interest returns) in the total cost of the

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Golbguru,

You created a mathematical illusion by at only the car and savings transaction:-) To get a picture, you have to consider total available funds.

In example, you didn’t include $292 monthly payment. It to come from somewhere either from savings or giving something up in your expenditures. Also, you didn’t that you don’t need to spending or saving if you pay cash. If you everything, I think net cash should be lower with the version, or you have to reduce elsewhere.

For reference, the logic I doesn’t work if your interest rate is higher the loan interest rate. In the where saving interest is it may make sense to borrow. But I bet is a certain gap that’s needed to do than break even.

is another reason why I’m against Ramsey. He’s great on the side of things, but he’s not so on the math.

Many people to pay off their mortgages in advance it gives them peace of I wonder how much peace of they’d get if they realized they were losing in costs. Look what you out with a 7% car over a short Now apply that to a home might be a tax-deductable 6% and compound over the 30 years that mortgages are. That of peace of mind can cost or hundreds of thousands of dollars.

an economic perspective the cost of the car is depreciation, maintenance etc. and the cost. Neither principle nor the upfront cash payment are The only difference between the two then is net interest cost. the cash scenario your is 5.15% of the total price. the loan scenario it’s on the outstanding loan and 5.15% on the you have paid back 5.15% you are earning on the money you paid back yet.

So the loan is more expensive you think about it in this This is as long as you rate of is lower than 7.0%. get more complicated if we bring into the picture

Super . This is where I address the payment per month: “Well, is one flaw in the above calculation it’s in the assumption that the $12,200 is available for earning in savings accounts. You have to that you are paying off the car loan monthly payments of about from the unspent $12,200 So each year, your reserve goes down, and so the interest earned on it.”

I am considering the total available — four years now.

The problem when mathematically, becomes: if you have now, would you rather get an loan to buy a car worth $12,200 or pay the cash for it? After four how much cash would you in hand with either

You said: “ In the case where interest is higher, it may make to borrow. ” — you don’t a saving interest higher the loan rate, since you are off (reducing) your loan year. So, it seems it’s ok to even if the interest rate is a of percentage points above rate of return. I will run a few on this over the coming

Moom . Depreciation and maintenance is the in both the cases — you pay upfront or borrow the money. like I said in the above the interest rates cannot be compared — I think you to calculate an “effective” rate of on the loan before you can compare it to the rate — that’s in the case of the savings account, the remains the same, whereas in the of the loan account, you are paying off the principal every month.

. Dave Ramsey definitely leveraging concepts. You are right, peace of mind might a lot when we think of bigger

You made the right decision. second guess yourself.

By the way math is wrong. You double the loss of interest. You can’t add it to the of paying cash AND subtract it the cost of borrowing a loan. Do one or the not both.

5.x% in a saving earns you maybe 4% after The car loan costs 7%. No contest To break even with the 7% car you need a return of 9-10%, no investment can guarantee.

TFB . “ You double the loss of interest. ” — I you are going in the right direction

I thought of that and tried to it into account with “ But even if you consider the extreme in which you didn’t earn any on the unspent cash, the total of the car still comes to about — that’s still than the first option. ” In case, we are not subtracting it from the of borrowing a loan. And yet it’s

I suspect you are making a mathematical when you are calculating the interest on the $12K, which steadily as you pay off the car loan.


According to Bankrate.com a 7% on a $12K car would have a car of $287.35 a month ($3448.20 a meaning at the end of 4 years you have off $13792.

If you take your and multiply it by 1.0515 and then $3448.2 for 4 years, you end up with meaning the car loan is $226 expensive than the all-cash

In point of fact you would even less since principle is actually being on a monthly basis, not an annula

Another factor not mentioned are the You would have to pay income at your marginal rate on the left in the bank. You don’t get to the interest paid on a car loan.

Hit the button too soon. The income you pay are on the 5.15% interest paid on the left in the bank (not on the balance).

I’m with Alex on one. I did a quick excel and came out with a net loss of based on Alex’s payment of $287.35 and the APR of 5.15% on the savings. My is that you would withdraw the to make the loan payment month. In essence you end up making the loan payment out of pocket.

11 Stankavich 07.18.07 at 3:17 pm

OK, now I read Engineer’s comment, I in a marginal rate of 15% for income tax and out with a bottom line of shortage at the end of the term. Obviously tax rate may vary significantly the nominal rate I used.

and Super Saver . After quick number crunching, I corrected (thankfully — I have lived with if I had ended up paying more the cash). I think the depleting after I borrow from the loan is confusing me.

Mike . If you your excel sheet would you care to share at loan APR the two options break Does it come out to be the same as the interest APR?

13 Mike 07.18.07 at 3:47 pm

golbguru, it like it breaks even 4.4%. I suspect that fairly closely to the 15% assumed tax rate. I should mention in my case, I also have 9% income tax in addition to 15% federal so I be facing a 24% marginal rate.

I also adjusted it to the notion you only pay taxes once per I made the assumption that you pay taxes on the 12th, 24th, and 48th months of the loan.

Here’s another way I thought it.

If it cost less to borrow using cash, we could all money borrowing at 7%, putting it in a savings account, and paying off the 7% in 48 months, even if we didn’t buy a We’d all be rich from easy money

You made the decision paying cash.

monthly payment would’ve $292.14.

PMT(0.07/12,48,-12200) = 292.14

The value of this payment without considering any tax effect, is which is exceeds your cost by $448.

PV(0.0515/12,48,-292.14) =

If you factor in a 15% tax rate, the present becomes $12,842, which you lose $642 if you financed. The your tax rate, the more you had you borrowed.

PV(0.0515/12*0.85,48,-292.14) = 12842

. Thanks for sharing the Excel

Super Saver . Now that you put it way, it does sound

TFB . Thanks. It’s slowly through my thick head.

. We will continue with the vs. Leverage discussion when the are in our favor. Right now, our savings account, it does to be OK to pay cash.

I guess I am trying to up with the big hollow that the has left in my pocket — it me into a panic, as in, “ holy I just spent $12,200 ” and makes me run for the calculator. Hopefully, I get out of it in a few more days.

17 Randy C. at 4:33 pm

Something totally to consider regarding financing or I have not done the following, but been told by a former car that financing can sometimes get you a deal on the final price the dealership plans on profit on the end” of the transaction.

Scenario as follows. You walk into a car and claim that if they can your credit union’s of whatever the going rate is + or so, they will start to see $$ in giving you a higher than rate loan through the

This in turn gives additional wiggle room on price, if they expect to $xxx in interest over the of the loan. Then you work on the purchase price as low as possible, they are thinking they give you an 8.0% loan in a market.

You accept the loan, driving down the price, pay off the loan in the first month. that there is no prepayment before taking out the loan.

I’d be to hear if anyone has used technique. Hypothetically applied to recent purchase of $12,200, say you got a 8.5% loan but with a price of $11,200, then it off in the first month.

BTW, the ends up loosing commission on once the lender gets its back from the dealer for the loan.

Hoping to hear on this.

Golbguru,

Of course, car don’t want you to think cow, I just spent They want you to think, it’s only $292.14 a

If everyone paid cash for cars, the cost of all cars be lower

First of all, why are you a Toyota Corolla at all? a bad investment whether you pay cash or

But since you did buy it. I guess I would if your cash isn’t what you want and it’s the best choice for you. done. I personally would invested that money in else and taken the loan if I needed a car.

The bottom after correcting calculations, is with a 7.0 % interest, you have to a return greater than AND have your extra invested at greater than for it to be a good deal with the This is because any money you owe on it accrue interest for every day you owe them money. So, you would to have it invested allt he too.

The fact is, there is no way you can get a 7.0% return anywhere. looking at investments that are for a short time of 4 years, its too to play the market.

Paying it off is by far a deal.

21 Derek 07.19.07 at am

Note that you don’t to take out the car loan when I am sure that your credit union or capitol one be glad to allow you to take out a against your car if you really that paying cash was the decision. You may end up with a better 7% interest rate as well.

. “ First of all, why are you buying a Corolla at all? That’s a bad whether you pay cash or not .” — how is Corolla a bad investment as compared to cars? I am not just thinking here, how about getting 37 per gallon on the highway?

Looks I don’t care about — probably suits me I wear jeans with in them.

23 Bill H. 07.19.07 at am

Paying cash completely risk out of the picture. Once the is done, there are no further or obligations.

And, what is a car worth in 48 months? Probably not you paid in on the loan.

Just my

24 Geekman 07.19.07 at 7:00 am

a little question to throw in the mix Has anyone thought about the of putting some money on the financed car vs. paying in full? For how would the math work out if paid $6K on his car and financed the rest at the 7% vs. the full $12+K?

Also, if had an extra $300 in his monthly to make car payments with, and his original $12+K became an car payment savings account he could put into a stock fund at 10% (maybe), how does the work out then? These are (to me) things to look into by ONLY looking at the actual on hand everyone seems to the very real possibility a persons current (and income can by itself meet needs.

Personally, (and doing any math on it) if I were a car I’d probably put the full amount a fund and take out a loan as as the loan was

7%. In fact, just about it right now, I probably call up a credit and take out a loan from at 0% for the first year and 6.99% I wonder how the math works in case?

I contemplated a similar when buying a new car at 5% interest. I so cash heavy, however, as I do in mutual funds. Selling and incurring the tax penalty would been pointless.

However, I was interested in taking out the loan I had not paid on a loan in over a (and my credit cards are in full each month). I was in maintaining my credit score, and the 5% seemed small in light of the market’s returns these

Don’t forget that yourself credit worthy requires borrowing. And when it time for a home loan, for the better rates go to the higher

Seems like you are only a few dollars lost. What’s the Big

You must be an engineer, you are good the numbers. Paying it cash is the approach. You are not “under debt”

people love to pay off their in advance because it gives peace of mind. I wonder how peace of mind they’d get if realized what they losing in opportunity costs”

Not all like to invest money, My home is paid for. I if I tell them I can make more money by not paying off the they will look at me Some people rather not the gamble.

@golbguru

let’s say you your job tommorrow, will you question yourself about cash for the car?

27 Debbie at 8:26 am

Two more points:

1) If you out a loan, the lender makes you collision insurance. In your with a two-year-old car, you collision insurance anyway, so point is moot. But since I buy cars, I never want to pay for insurance, because the car is worth so that even the tiniest is considered totalling the car and they pay you much. So I always pay cash.

2) If making payments, something go wrong. You could accidentally one late. Even if you’re automatically electronically, there still be some kind of Maybe you want to change or there’s a computer glitch or who This way, your car is paid off, and no kind of or glitch is going to take away from you (at least so as you keep your receipt title).

The fact that feeling a little weirded out $12,200 has just disappeared is because $12,200 did just At the same time, a practically new car has Hopefully that’s a big deal,

28 Debbie 07.19.07 at 8:31 am

comment about losing job reminded me of another point. If you had out that loan, you would had more flexibility with other money. You could some of it without selling car first (though you’d have to get more to keep off the car) whereas now you can’t.

29 07.19.07 at 8:59 am

I also cash for my car — more or because the interest they is higher then what I get in a considering my tax bracket (plus NY State tax). Once a time, when the interest was tax (a very long time I had a car loan. But after it stopped tax deductible, I started paying for cars (changed a couple in 20 or so for various reasons). I always with bank rates than stock market you cannot be guaranteed that are going to be up at exactly the time you may the money, but you still have to payments.

“Many people to pay off their mortgages in advance it gives them peace of I wonder how much peace of they’d get if they realized they were losing in costs”

Not really. As I mentioned, you have pay your mortgage, if you loose a job at exactly the time of market crash. Sure if mortgage rate is less you have in guaranteed accounts, it may sense to keep the mortgage. It depends on how secure one’s is, and one’s age and tolerance of risk. makes sense for 20-something necessarily make sense for

30 Kitty 07.19.07 at 9:23 am

of all, why are you buying a Toyota at all? That’s a bad investment you pay cash or not.” — how is Corolla a bad investment as compared to cars? ‘

I have the same I used to have a Corolla and I it. Now I drive Honda Civic, but I at both when I was buying and the one where the dealer gave me a deal. These are my two preferred though.

Incidentally, judging by how insurance paid for my 2003 when I totalled it in 2006 I don’t have the numbers me, can find them later it hasn’t lost that value over three (of course, I couldn’t sell it for amount, it was more of a “suggested value, but even if I could get a thousand less it still be OK). Corollas are also reliable from what I

Geekman . “ Just a little to throw in the mix here. Has anyone about the pro/con of putting money down on the financed car vs. in full? For example, how would the work out if Golbguru paid $6K on his car and the rest at the 7% vs. paying the full ” — Instinctively, without math, it has to be on an intermediate ground paying-all-cash and paying-all-loan. If paying all is the best option, then, loan amount you borrow, option will step a bit down from the *best* — the extreme case paying-all-loan. Hope that sense.

Dr. D . Thought about but right now my FICO score is so I am not much worried in that This loan *could* raised it to beyond 750 (after a of years with regular but I think I will cross anyways in about couple of or slightly more. Plus, I am not to borrow for anything till time, so I took this out of the equation.

MoneyMonk . “ let’s say you your job tommorrow, will you question yourself about cash for the car? ” — I don’t see how that will a difference. Once I buy a car worth — whether I pay it upfront or get a I will be in equal trouble if I my job. If I get a loan, then I am my cash at present — I will use to pay off the remaining loan if I my job.

I think I am a safe in that department (some even call me risk-averse), if I had taken the loan, I would had enough funds to cover it in of a disaster — that is, if I my job or something. Things are problematic when people borrow they don’t have the — I am going to steer of such situations as much as This thinking is going to put me in when I look for a house, but we see what happens then.

So, my has been more along the of “ is it possible that the cash I paid upfront may have me greater returns if I opted for the instead? ”

Debbie . Yeah I what you are saying with “ At the same time, a practically new car has Hopefully that’s a big deal, ” … Apparently, it looks like I my money more than the new car what causing the panic.

. I agree with you on Toyota and resale value. Of course, my brother calls Toyota “a for the aged” (it’s that at times), but even he doesn’t the reliability.

I guess I commented I knew your finances. If you a enough cash to protect you you get laid off. Well for the of leverage, you would have out less if you financed it. Because of the

33 bubba 07.20.07 at 3:07 pm

yer crazy. Instead of looking at how the car *costs* why not add up how much you can potentially

Say you have $12,200 cash in

Option 1: Take the loan and pay to your debtor while the $12,200 at 5.15%. After 48 you have $14,984.18 in the bank and have spent 14,022.92. Net = $961.26

Option 2: Pay cash and put into a savings account at After 48 months you have in the bank, and will have $12,200. Net gain = $3,336.24

like a no-brainer.

Congrats on a Toyota. You bought one of the most cars. I paid cash for my BMW and car has broken down on me several Whereas my Toyota has not had 1 problem the day I drove it off the lot.

Cash is the way to buy a car as it forces one to only buy what one can Unless you a low APR like 0.9%.

35 07.23.07 at 7:00 am

One of the benefits to for me in particular is a service offered by my union called a courtesy Basically, the credit union record your loan as a on your real estate, may make the interest on your loan tax-deductible. There is a small recording fee of $39 for the first and the credit union handles all the for you.

So for a 60 month term I never use, always 36 48 at the max), at the 7% APR you indicated, the Effective APR the potential savings of the tax deduction can be 5.25%, making it more with paying cash. my last loan was for 36 months at 5%, equals about a net effective APR of or so.

I think it boils down to choice. Until interest go sky-high, I would prefer to advantage of (reasonably) low-interest and a regular monthly payment than deplete my cash There’s a certain comfort I have knowing that available to me.

I’d rather not deal the bank. I prefer cash. If means I lose a few bucks, so be it. I’m with my wife’s auto right now. Bank have correct insurance and decided to charge us their own by discretely taking it from the payment and not bothering to tell us not even indicating it on the payment the interest and principle payment didn’t add up and we had to call just to out what was happening).

I have things to do than deal these people and their CSRs making mistakes day.

37 urtrue 08.22.07 at pm

Cash paid: $12,200.

by CC…CC paid in full at due points, higher Credit ;-))

38 BigStar 09.21.07 at am

If you are earning 5.15% on your you must factor in the inflation of around 3% which makes cash earnings of only you must also factor in same rate of inflation in on the cash deal which your money and paying a more valuable option, your money loses no when you pay cash in fact it

39 cpfoutz 10.14.07 at 9:00 am

interesting how people say they better peace of mind by cash…So long as the interest is low, I have better of mind by taking a loan. If I 15,000 in savings and use 12,000 of to buy a car, that leaves me $3,000 in savings. I’d rather the 15,000 there…what if I were to my job? If you’re disciplined and make sure you can pay 100 percent of debts (except your you never have to worry not being able to meet payments, so really there is piece of mind by borrowing.

To the that said an if you could money on a 7% loan then would be out there making just to get rich…you’re forgetting is a secured loan. A bank give you a 7% loan unless got an asset to back it up. I have a 2% loan…you can’t tell me I make money on that not everyone can go out and get a student loan.

40 11.15.07 at 9:58 am

About two ago, my wife and I ruined our by creating a restaurant. I truly the crushing weight of debt. after this, my wife her professional job out of the blue. After two of struggling we have just to recover by re-entering our professions.

If we have remained in our fields we have been fine, but in unfulfilled way. We know now anything can happen and not having to pay bills is beyond scary. It is with your parents for two when you are over 30 scary. bad that could happen for illness did happen.

Although, I would not have paid much cash for a used it was an excellent decision.

car Smart K

While our salaries now put us in that top 20 percent of earners, we owe a lot of money.

Before our we were credit and credit free, except for school We are trying to reach that again, minus the school

Cash is almost always Living well below means is beyond awesome.

As Foxx said, “I bet I can enjoy my better than you can enjoy dime.

Hi,

I haven’t seen mention Insurance. When you pay for a car in in full you can reduce your coverage to just liability. can often provide savings the interest, provided you’re to take a risk betting on driving ability. I’m confident in my ability and don’t feel be at fault were an accident to Even if it were to occur, I can to buy another car outright so the risk financial sense for me.

The logic is simple here i guess. If the could have made money on savings, instead of of it out they would have done that without money on collateral that

Interest lost on Loan for car of cash (48 months @ 7.0%

All remaining equal it is a no brainer:

Lost on Loan (48 months @

Also as Engineer said, you pay taxes on interest from remaining in the bank.

One more with the cash option the first of the month is like the of the month, no worries. Also, you truly earn the right to put a sticker that says: laugh it’s paid

Cash talks and credit Save and buy cash.

44 Crash at 6:08 pm

I am just now considering vs loan. I pretty much with the “what will I (in cash), at the end” way of figuring Bubba went with. I around with interest (reasonable and current rates), my tax rates of return on investment and conservative) and in most scenarios for me it came out pay cash. I also that I saved the amount of the car loan monthly payment have been to recover expenditure over time.

the point about afford-ability to play. I have enough that I could buy a really car, but I would obviously my savings leaving me with “up the creek with no paddle” in my stomach. On the day the world comes in on you, a shiny new car won’t you any comfort points over a practical one. In fact, probably give you an acute of buyer’s remorse. But, a more practical car paid a fraction of your savings you to have transportation AND an emergency to play with (as well as no to have to pay off.) Unless you can that rare 0-2%, I see too many scenarios where a better way to go …

I think a duffel bag of cash would have a private seller to let me have ‘05 Corolla for $11k. My plan for doesn’t involve trying the system with clever and the use “other peoples money”. You as well save for retirement the cash back and points credit cards. Cash… you did although I suspect you’ve not yet embraced the psychological benefits. the freedom!

The loan payback come to at least $15,616.

Ohh you forgot to calculate the taxes you to pay the IRS if you make interest from the Also when you get a car loan you pay fees, processing fees, fees, etc… The no brainer is to pay cash.

48 JamOnIt 04.14.09 at am

There seems to be really advice on this site, so I to ask my own question which pertains to the stated car buying question and for some helpful advice. I a unique situation and am unsure of how to Your time is much if you read on.

I came into money recently. After off personal debts, credit and starting my first retirement I now have $95K in the bank. The car I is $20K which will me with $75K in the bank (if I pay

I really want the fully 2008 Honda Accord and like I deserve a safe, and reliable car for the first time in my There is not much difference in the ‘09 from the ‘08 except for saving So I plan to purchase an ‘08 Accord and would make me very since I could never a decent car in the past. this is the major purchase I am allowing with this new money.

a failed business and a divorce, I for Chapter 11 in 2004. I am financially despite (or because) of that Last I checked, my credit was about 620 and I am certainly interested in it. I am aware that financing a car is a good way to do that. But at what

My question:

I want to purchase the ‘08 for $20K. Is it still better to pay when I have a decent of money in the bank? My credit offers either a secured for 4.5% for 2 years, or a car loan will be certainly a higher and most likely a longer especially since my credit is not With a secured loan, won’t own the car title, so would off a secured personal loan help my FICO the same way a car would? The secured loan also auto debit the from my credit union account which only 0.25% at the moment. I would put in that account and leave it to pay on it’s own for the next 2 years. But that help my FICO?

Or, by a regular auto loan, having the extra $20K in higher yield bank (somewhere) be beneficial in terms of or gaining interest to offset the charges? I can’t seem to any decent APY’s from accounts, CD’s or Money that would compete a likely 7% car loan (my HSBC account started at 4.5% in and is now 1.65%). I keep looking for on-line, but there’s only so I can find. I certainly hope to get my up and own a condo one day, but don’t enough for a down payment to a potential mortgage worth it to me my rent is quite cheap. So for I just want a decent car to go my small 1 bedroom rent apartment.

So in my case, should I buy my $20K dream car with finance with a car loan at 7% or higher for a few years, or take a credit union loan for at 2 years? Either way, I money left over in the but I do want to build my credit as as have money to make investments. Your professional is greatly appreciated. Thank

Debt increases risk. You to factor that into the as well. Simply put, you almost always be better off cash than taking out

There’s another reason to pay for a car. You don’t need to buy the expensive insurance coverage. If the car is the insurance is extremely high for me.

say that “cash” is a much choice in July, 2009. luck getting even 2% for cash sitting around. The way I’d take a loan is if it was for 0% and there are deals out there like Still you have to usually up a rebate.

Hi all. Im from and all these talks is really Im trying to save up for a car that i can so i can buy it in cash, then i found blog on the net. Tell you you all are blessed enough to get an 05 Corolla 21k miles only…) for USD12,200. in Msia an 05 Corolla with 100,000km (thats more 50k miles) cost us RM81,000, translates to almost USD23,000… nobody buy car in cash in Msia, new car thanks to our hefty 200% tax on car to protect local car manufacturer. Its since the 80’s….

Im saving up so i can afford to buy an used car with but that leaves me options from before the year However, for car loan interest in msia for new car is only 2.xx% and on used car.

Sorry off but yeah, im in support of buying in because i pretty much to avoid debt before i on a home mortgage. (just work a year ago)

53 08.21.09 at 6:27 pm

I believe if one has to finance a car, they are a car that they can not really afford. Financing a car is a bad financial because one is borrowing money interest on something that quickly (especially with cars). So, not far into the duration of the one often owes more the car is worth! This doesn’t add up or any sense- to borrow money to buy that ends up being less that what you owe.

People who buy expensive cars often buy them in because they know borrowing money to buy cars bad financial sense, especially for ones. Perhaps this is one of the that these buyers money- one would have to that they made wise financial decisions. are better than not that people I know who drive (or around in) expensive luxury bought them in cash.

The reason that I can think of how money to buy a car makes sense is if one not have a lot of cash on hand and a car for transportation. In this case, it be best to borrow money for an used car, borrowing as as possible.

54 Kevin 08.21.09 at pm

Regarding my previous comment, are better than not that people I know who drive (or around in) expensive luxury bought them in cash. “,

who are driven around in these luxury cars also pay the of their chauffeur in cash,

55 Kevin 08.21.09 at 7:40 pm

thing… buying a car in cash one to be in a better negotiation position, when dealing with pesky car salesperson who is trying to as much money out of you. By a car in cash, the dealer is more likely to sell the car to you for a discount and you do not to deal with financing or banks, etc.

The dealer very likely sell a car at a if it is bought in cash because of the money is right there. On the hand, if the car is purchased by financing, the is very unlikely to sell car at a discount because is not guaranteed 100% of the money is there.

For example, if one is purchasing a car like an A6, the MSRP price is around (close to the price of the one on the showroom). note that this is an example, not an actual case of 2 persons purchasing this particular car. Also, car, the Audi A6 is used as an for the sake of illustrating my point. In I have no financial interest in and not by Audi AG, any of its sales agencies, or any parent or affiliated companies.

to the original topic, if one goes to the intending on buying it with negotiates aggressively with the and outwits the salesperson’s tricks, and slick-talking, one can likely get this car for as low as $38,000-$40,000. This price is above the invoice price for the and the dealer still has a profit at price (although a thin

On the other hand, if one goes to same dealer intending to it, one is unlikely to get this much of a as the cash buyer. This would be lucky to get this car at a for around $47,000-$49,000. This is based on the same assumption this buyer is smart to outwit all of the salesperson’s tricks, and slick-talking. The only difference is that since the buyer not have the cash and is financing the the dealer will not extend the discount as they will to a buyer.

There is a cliche says, “money talks and walks” and another one that “cash is king”. This applies in this case.

56 11.12.09 at 6:39 pm

You also something else. Insurance.the cost for insurance on a financed car to include gap nsurance.

Guys, you think cash in hand an important factor in todays unstable market ?

Can some one me.

Its funny how the comments are added the years.

I dont know if any one has up to date calculations, but in 2010 no investment is earning 10%, I’d be with 3%.

An average high savings account earns then 1.5% and loans are 2%.

Cash all the way.

59 Chris at 2:57 pm

In all the math you people are you have ignored one important risk.

Risk is always enhanced when you take on that’s why they call it a What happens if you take out a and you lose your job, spouse gets sick or the has to be replaced? It’ll be a lot easier to a financial storm when you have to make payments to the

Not only that but if you tuck the car payments of $300 you would been making in a growth mutual fund that has 10 percent over a long record you would have in 30 years. What kind of car do you you would buy with that of money in the bank?

This how become millionaires. Cash all the

What a mixed bag!

comments, but I wonder why there is so pointless discussion and math around the idea of cash credit. Obviously (as some said) credit will cost more than The formula is immune to marginal tax inflation or any other dynamic. could not exist if they more in interest than can recover in interest..simple!

So, as has been the value of credit (and it’s reason for existence) is Those contributors who believe wealth is generated from money “piggy bank” are misinformed.

Anyone with resources should consider the that it took to acquire

Rather than look at the argument with money in the you should step back to a balance situation. You have no vehicle, and no savings. Now, your options for that car.

1. Save $200+ a for 40 months or so and be without private for that time. Even if you the time to 30+ months (factoring payments) you are still looking at a time without the transportation you have already decided you need. This time mobility represents a big delay in plans.

As mentioned by others, is an “opportunity cost”.

2. Borrow the and get in the car now. Sure, you pay a few points in but look at what those have afforded you! You been driving the car and (hopefully) good use of it for three years than a cash plan allow for.

I would ask you to a savings plan that buy a home for a first time Sure, you could probably get how old would you be? Where would you lived and raised your during the saving time?

when viewed in the broader is very cheap.

Cash is to accumulate, and keep. The true of cash is as a hedge against I keep a cash fund for the not the expected! Vehicle expenses are not and should not deplete your net! Credit purchases are negotiable, even after the Cash payments are final!

Get wise.

verna is the most car which people can purchase a small cash or cradit an advantage is supperb looks and manufacture with a 1000000 rs thats a good implimentation of for enjoyment and office car

I think I rather pay for a car in cash up front. But not can afford to do that. There are things to consider and the outcome vary from person to

I bought a car and paid off right Even with very low APR are happening right now, I it was still better than a credit.

goo.gl/CoRHW

Just to add to my comment. With a low interest environment, it might be worth credit at this moment and cash somewhere else.

I your blog. very colors theme. Did you design website yourself or did you hire to

You actually make it seem so together with your but I in finding this matter to

It of feels too complex and extremely

i am to find much more and other content such as one, I write blogging about very similar so Buying A Car With Cash: Or Not? gives me more hi Tran Schimandle

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