Why pay cash for a car?

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RDHlooking4FIRE
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Why pay cash for a car?

Post by RDHlooking4FIRE » Sun Nov 12, 2017 5:16 pm

I can understand paying off a mortgage, because rates are higher than car loans. And you wouldnt take a new loan out to invest in the market now.

I am saving cash for my next car purchse. But why? Car loans are cheap. My current car is paid off and i like being debt free. Is that the best method?
Last edited by RDHlooking4FIRE on Sun Nov 12, 2017 5:22 pm, edited 2 times in total.

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dm200
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Re: Why pay cash for a car?

Post by dm200 » Sun Nov 12, 2017 5:18 pm

RDHlooking4FIRE wrote:
Sun Nov 12, 2017 5:16 pm
I can understand paying off a mortgage, because rates are higher than car loans. And you what it take a new loan out to invest in the market now.
I am saving cash for my next car payment. But why? Car loans are cheap. My current car is paid off and i like being debt free. Is that the best method?
These VERY low new car loan rates are very tempting ...

RDHlooking4FIRE
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Re: Why pay cash for a car?

Post by RDHlooking4FIRE » Sun Nov 12, 2017 5:43 pm

Before i paid off my car the interest rate was 1%. My online savings account is earning 1.3%.

I do really like being debt free though. But am i missing out on cheap money?

Gill
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Re: Why pay cash for a car?

Post by Gill » Sun Nov 12, 2017 5:47 pm

RDHlooking4FIRE wrote:
Sun Nov 12, 2017 5:43 pm
Before i paid off my car the interest rate was 1%. My online savings account is earning 1.3%.

I do really like being debt free though. But am i missing out on cheap money?
The interest income is taxable and the car loan interest isn’t deductible so you are probably losing on the deal.
Gill

supersecretname
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Re: Why pay cash for a car?

Post by supersecretname » Sun Nov 12, 2017 5:55 pm

The prevailing wisdom is that by financing you will buy more car than you should. If you will truly get the same exact car, financing may not be a bad idea.

I got a 2017 base honda fit and am paying 0.9% for 5 years. Made no sense to pay that in cash, and it didn't influence my decision.

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Alexa9
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Re: Why pay cash for a car?

Post by Alexa9 » Sun Nov 12, 2017 5:57 pm

I prefer to be debt free other than a mortgage. One less bill to pay. Although 0-2% is hard to turn down. It's easy to buy more car than you can afford/need if you finance/lease.
Last edited by Alexa9 on Sun Nov 12, 2017 5:58 pm, edited 1 time in total.

RDHlooking4FIRE
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Re: Why pay cash for a car?

Post by RDHlooking4FIRE » Sun Nov 12, 2017 5:58 pm

supersecretname wrote:
Sun Nov 12, 2017 5:55 pm
The prevailing wisdom is that by financing you will buy more car than you should. If you will truly get the same exact car, financing may not be a bad idea.

I got a 2017 base honda fit and am paying 0.9% for 5 years. Made no sense to pay that in cash, and it didn't influence my decision.

Poll: do most boggleheads pay cash for cars or get low interest loans?

J295
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Re: Why pay cash for a car?

Post by J295 » Sun Nov 12, 2017 5:58 pm

OP ... yes, it is valuable IMO to avoid debt notwithstanding attractive car loan rates (still debt).

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CAsage
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Re: Why pay cash for a car?

Post by CAsage » Sun Nov 12, 2017 5:59 pm

RDHlooking4FIRE wrote:
Sun Nov 12, 2017 5:43 pm
Before i paid off my car the interest rate was 1%. My online savings account is earning 1.3%. I do really like being debt free though. But am i missing out on cheap money?
Like in most financial decisions, the numbers matter. Vanguard CA tax-free intermediate fund is paying 1.77%, and my new car loan is a 5-year 0.9% loan. No rush to pay that off.... I'm ahead every month. However, with low savings rates and low interest car loans - it's so close it won't make a big difference either way. There are much bigger factors in long term wealth.
Salvia Clevelandii "Winifred Gilman" my favorite. YMMV; not a professional advisor.

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White Coat Investor
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Re: Why pay cash for a car?

Post by White Coat Investor » Sun Nov 12, 2017 6:01 pm

RDHlooking4FIRE wrote:
Sun Nov 12, 2017 5:16 pm
I can understand paying off a mortgage, because rates are higher than car loans. And you wouldnt take a new loan out to invest in the market now.

I am saving cash for my next car purchse. But why? Car loans are cheap. My current car is paid off and i like being debt free. Is that the best method?
For the same reason I pay cash for refrigerators. Or groceries. Or a pack of gum.

If the arbitrage on what you're paying for the car loan and what you'd earn in tax-free muni bond fund is enough money to make a difference in your financial life, you're probably buying too much car.

Take the example above- earning 0.8% more than what the loan is costing. So let's say it's a 5 year note on a $20K car. 0.8% of $20K is $160 a year. So maybe $500 over the course of 5 years. No thanks. I'll just pay cash. It's not that the math is wrong, it's just that I'm not going to deal with being in debt for 5 more years and keeping track of all that for $500.
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TheGreyingDuke
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Re: Why pay cash for a car?

Post by TheGreyingDuke » Sun Nov 12, 2017 6:07 pm

If the rate is low enough to be attractive, it is being subsidized by the auto maker. If you go all cash, you can get some of that subsidy in the form of a price reduction.
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SlowMovingInvestor
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Re: Why pay cash for a car?

Post by SlowMovingInvestor » Sun Nov 12, 2017 6:07 pm

Many ultra low loan rates seem to be offered in lieu of a rebate. So one needs to take the loss of the rebate into account when deciding whether to pay cash or not.

bgf
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Re: Why pay cash for a car?

Post by bgf » Sun Nov 12, 2017 6:14 pm

can you get rates that low on used cars?

RDHlooking4FIRE
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Re: Why pay cash for a car?

Post by RDHlooking4FIRE » Sun Nov 12, 2017 6:17 pm

bgf wrote:
Sun Nov 12, 2017 6:14 pm
can you get rates that low on used cars?
I dont think so.

So your point is look for rebates and pay cash?

RDHlooking4FIRE
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Re: Why pay cash for a car?

Post by RDHlooking4FIRE » Sun Nov 12, 2017 6:18 pm

White Coat Investor wrote:
Sun Nov 12, 2017 6:01 pm
RDHlooking4FIRE wrote:
Sun Nov 12, 2017 5:16 pm
I can understand paying off a mortgage, because rates are higher than car loans. And you wouldnt take a new loan out to invest in the market now.

I am saving cash for my next car purchse. But why? Car loans are cheap. My current car is paid off and i like being debt free. Is that the best method?
For the same reason I pay cash for refrigerators. Or groceries. Or a pack of gum.

If the arbitrage on what you're paying for the car loan and what you'd earn in tax-free muni bond fund is enough money to make a difference in your financial life, you're probably buying too much car.

Take the example above- earning 0.8% more than what the loan is costing. So let's say it's a 5 year note on a $20K car. 0.8% of $20K is $160 a year. So maybe $500 over the course of 5 years. No thanks. I'll just pay cash. It's not that the math is wrong, it's just that I'm not going to deal with being in debt for 5 more years and keeping track of all that for $500.
What's the interest rate on a pack of gum? Jk

student
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Re: Why pay cash for a car?

Post by student » Sun Nov 12, 2017 6:22 pm

I know it is somewhat silly but I do not want to deal with car payments.

Suman
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Re: Why pay cash for a car?

Post by Suman » Sun Nov 12, 2017 6:25 pm

Many car owners do not carry collision type coverage. Car finance companies usually require you to carry these additional coverages. One can avoid it by paying cash.

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Sandtrap
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Re: Why pay cash for a car?

Post by Sandtrap » Sun Nov 12, 2017 6:26 pm

I prefer No monthly payments on anything. Zero Debt.
Very old school perhaps but I like the sleep factor.

KlangFool
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Re: Why pay cash for a car?

Post by KlangFool » Sun Nov 12, 2017 6:29 pm

RDHlooking4FIRE wrote:
Sun Nov 12, 2017 5:16 pm
I can understand paying off a mortgage, because rates are higher than car loans. And you wouldnt take a new loan out to invest in the market now.

I am saving cash for my next car purchse. But why? Car loans are cheap. My current car is paid off and i like being debt free. Is that the best method?
RDHlooking4FIRE,

1) I do not save for a new car. My annual savings is high enough to "cash flow" a new car.

2) I took a car loan because the car dealer paid for the interest on the car loan plus a few hundred more. It is cheaper than paying cash.

KlangFool

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Re: Why pay cash for a car?

Post by KlangFool » Sun Nov 12, 2017 6:30 pm

Duplicated post.

KlangFool
Last edited by KlangFool on Sun Nov 12, 2017 7:08 pm, edited 1 time in total.

drekce
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Re: Why pay cash for a car?

Post by drekce » Sun Nov 12, 2017 6:48 pm

TheGreyingDuke wrote:
Sun Nov 12, 2017 6:07 pm
If the rate is low enough to be attractive, it is being subsidized by the auto maker. If you go all cash, you can get some of that subsidy in the form of a price reduction.
I was actually in a Nissan dealership negotiating over a new car purchase this weekend. I actually would get a better overall car price by financing through Nissan, as there were additional rebates through the dealership for financing. Since my credit is >800 I also was eligible for a rate just over 1%. I was told I could only put up to 10% down to qualify for the rebates (which is way less than I intended to put down), and I saw no prepayment penalties in the loan agreement that would prohibit me from paying it off immediately.

Alas, my wife and I decided to keep our ten year old Armada a few more years and buy the new model used when they are readily available...

hushpuppy
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Re: Why pay cash for a car?

Post by hushpuppy » Sun Nov 12, 2017 6:49 pm

delete
Last edited by hushpuppy on Fri Nov 17, 2017 9:44 am, edited 1 time in total.
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grettman
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Re: Why pay cash for a car?

Post by grettman » Sun Nov 12, 2017 6:50 pm

i don’t like debt. For some people, it works but I came from a family that is bad w money... I fear debt. I sleep well knowing I don’t owe money on cars and CCs. Working on paying off mortgage too. I just don’t want to play kissy face w banks... no thanks.

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ClevrChico
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Re: Why pay cash for a car?

Post by ClevrChico » Sun Nov 12, 2017 6:56 pm

Paying cash makes the transaction simpler, and you can spend your energy getting the best deal. Also, full insurance coverage with low deductibles will likely be required by the lender. If you pay cash, insurance coverage levels are your decision.

fabis
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Re: Why pay cash for a car?

Post by fabis » Sun Nov 12, 2017 7:00 pm

if you can afford the car outright but choose to go with payments, why not just give them the 3 grand extra right then and there?

hushpuppy
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Re: Why pay cash for a car?

Post by hushpuppy » Sun Nov 12, 2017 7:05 pm

delete
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KlangFool
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Re: Why pay cash for a car?

Post by KlangFool » Sun Nov 12, 2017 7:10 pm

SlowMovingInvestor wrote:
Sun Nov 12, 2017 6:07 pm
Many ultra low loan rates seem to be offered in lieu of a rebate. So one needs to take the loss of the rebate into account when deciding whether to pay cash or not.
SlowMovingInvestor,

In my case, it is the reverse. I received an extra rebate for taking a car loan instead of paying cash.

KlangFool

Impromptu
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Re: Why pay cash for a car?

Post by Impromptu » Sun Nov 12, 2017 7:12 pm

0% dealership loans are more expensive than paying cash (either your own check or outside loan) because they will raise the price in many different ways that you don't see unless you run the numbers each time they write something new down. Look for the final amount you pay rather than all the other distractions thrown around.

You are in the best possible position if you get the internet price on the car you want that they have in stock, have no trade-in, and are not financing through the dealership. Paying cash usually ends up being the cheapest overall price.
I'll gladly pay you Tuesday for a hamburger today.

bgf
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Re: Why pay cash for a car?

Post by bgf » Sun Nov 12, 2017 7:14 pm

RDHlooking4FIRE wrote:
Sun Nov 12, 2017 6:17 pm
bgf wrote:
Sun Nov 12, 2017 6:14 pm
can you get rates that low on used cars?
I dont think so.

So your point is look for rebates and pay cash?
personally, given my current net worth, I would only ever buy a used car. if i could buy a used car and borrow at < 1.0%... then maybe I would actually put up with the payment for 2-3 years and keep the cash in my MM. maybe.

there will (hopefully) come a time when the new car depreciation is negligible in comparison to the growth of my net worth, and if the joy I get from buying a brand spanking new vehicle is worth more to me than that depreciation, I'll buy a new car. Until then, I just cannot accept that kind of depreciation for something that functions identically.

Slacker
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Re: Why pay cash for a car?

Post by Slacker » Sun Nov 12, 2017 7:18 pm

SlowMovingInvestor wrote:
Sun Nov 12, 2017 6:07 pm
Many ultra low loan rates seem to be offered in lieu of a rebate. So one needs to take the loss of the rebate into account when deciding whether to pay cash or not.
I was offered a better deal to finance through the dealer than paying cash on the out the door price (obviously, if I kept their financing the deal swings the other way). This wasn't manufacturer's financing so I still received all the rebates.

KyleAAA
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Re: Why pay cash for a car?

Post by KyleAAA » Sun Nov 12, 2017 7:19 pm

You can often get a better deal financing because dealerships get a kickback for arranging it and are universally willing to split it with you. If the dealer knows you’re paying cash it weakens your negotiating position, so the quoted rate is further subsidized in that sense.

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Watty
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Re: Why pay cash for a car?

Post by Watty » Sun Nov 12, 2017 7:52 pm

One thing to watch out for is that I have found when paying cash for a car is that I tend to buy less expensive cars and to keep my prior car a bit longer.

I don't often write five figure checks so when I do adding a few thousand dollars to get the next higher trim level is a lot harder than having a payment that is a few bucks a month higher.
Last edited by Watty on Sun Nov 12, 2017 8:34 pm, edited 1 time in total.

scrabbler1
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Re: Why pay cash for a car?

Post by scrabbler1 » Sun Nov 12, 2017 8:04 pm

What about telling the car salesman you plan to get a loan but at the last minute, after agreeing on a price, tell him you plan to pay cash? Would that work?

Put me down for paying cash anyway for the reasons others have already stated.

hightower
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Re: Why pay cash for a car?

Post by hightower » Sun Nov 12, 2017 8:08 pm

I paid cash for both of our cars. It just feels better. Adding another required montly payment to my plate doesnt feel right to me, regardless of the interest rate.
More importantly though is that forcing yourself to pay cash helps prevent you from spending more than you can afford. Too many people simply look at the monthly payment when deciding of they can “afford” the car they want. And hence they take out 6 year car loans for a car that 50% or more of what they make per year.
I used to be one of those types and I’m not anymore and it feels great. I hope to get rid of my mortgage someday soon as well for the same reason.
I now believe that one should not spend more than 20% of your annual salary on a car. If u can stay within that guideline and u want to do it with a zero interest loan, I suppose that’s fine. But most people will end up spending more.

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bottlecap
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Re: Why pay cash for a car?

Post by bottlecap » Sun Nov 12, 2017 8:14 pm

I don't like having another payment to worry about. The potential of making a small gain on a small amount of money is not going to change my life. I'd far prefer to pay cash.

JT

Absolutely!
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Re: Why pay cash for a car?

Post by Absolutely! » Sun Nov 12, 2017 8:21 pm

Last time we bought a new car we financed through the dealership which gave us an extra rebate, then immediately paid the loan off. Prefer to not have payments, and agree that knowing you're essentially paying cash tends to limit option creep.

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White Coat Investor
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Re: Why pay cash for a car?

Post by White Coat Investor » Sun Nov 12, 2017 8:31 pm

hushpuppy wrote:
Sun Nov 12, 2017 6:49 pm
White Coat Investor wrote:
Sun Nov 12, 2017 6:01 pm
RDHlooking4FIRE wrote:
Sun Nov 12, 2017 5:16 pm
I can understand paying off a mortgage, because rates are higher than car loans. And you wouldnt take a new loan out to invest in the market now.

I am saving cash for my next car purchse. But why? Car loans are cheap. My current car is paid off and i like being debt free. Is that the best method?
For the same reason I pay cash for refrigerators. Or groceries. Or a pack of gum.

If the arbitrage on what you're paying for the car loan and what you'd earn in tax-free muni bond fund is enough money to make a difference in your financial life, you're probably buying too much car.

Take the example above- earning 0.8% more than what the loan is costing. So let's say it's a 5 year note on a $20K car. 0.8% of $20K is $160 a year. So maybe $500 over the course of 5 years. No thanks. I'll just pay cash. It's not that the math is wrong, it's just that I'm not going to deal with being in debt for 5 more years and keeping track of all that for $500.
White Coat Investor, I respect your opinion and your profession. You are certainly capable of making the decision to forgo the $500, due to your own lofty financial circumstances. I hope I never get to the position, where I would want to forgo $500 in a similar situation. Maybe it's because I once worked for $9 a day for a 14 hour day. I was ecstatic to have the opportunity. My circumstances have built my (bad) character. :) A difference in circumstances (past or present) generally makes a person's perception of a situation different as well. This is not a surprise to anyone. To each their own

Regards,

hushpuppy
$9/day? I hope that was a long, long time ago. Minimum wage is $100 a day in some states.

One of my points is that if you're making $9 a day you shouldn't be buying a $20K car. Actually you probably shouldn't be buying a car at all on that income. But there is some amount of money where it is no longer worth the hassle of financing to get it, right? Would you deal with 5 years of loan payments to make $100? How about $20? How about $2? We've all got a limit.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course

runner540
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Re: Why pay cash for a car?

Post by runner540 » Sun Nov 12, 2017 8:32 pm

Sandtrap wrote:
Sun Nov 12, 2017 6:26 pm
I prefer No monthly payments on anything. Zero Debt.
Very old school perhaps but I like the sleep factor.
+1
Felt really good to write that check for a car. Seeing the cash leave my account all at once is different than in bites over time - kept me honest about the real cost of the car.
Philosophically, I don't want to finance a depreciating asset.
Plus, KISS. No need for an extra payment to worry about.

SlowMovingInvestor
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Re: Why pay cash for a car?

Post by SlowMovingInvestor » Sun Nov 12, 2017 8:38 pm

KlangFool wrote:
Sun Nov 12, 2017 7:10 pm
SlowMovingInvestor wrote:
Sun Nov 12, 2017 6:07 pm
Many ultra low loan rates seem to be offered in lieu of a rebate. So one needs to take the loss of the rebate into account when deciding whether to pay cash or not.
SlowMovingInvestor,

In my case, it is the reverse. I received an extra rebate for taking a car loan instead of paying cash.

KlangFool
I am sure it varies depending on vehicle and dealership. When I was buying a car recently, I knew the manufacturer had a choice of 0% financing or a rebate. The salesperson didn't even mention the 0% financing, but instead said that I'd get a higher rate (I don't remember the rate exactly, but it was over 3%). I went with cash.
Last edited by SlowMovingInvestor on Sun Nov 12, 2017 8:49 pm, edited 1 time in total.

KlangFool
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Re: Why pay cash for a car?

Post by KlangFool » Sun Nov 12, 2017 8:46 pm

SlowMovingInvestor wrote:
Sun Nov 12, 2017 8:38 pm
KlangFool wrote:
Sun Nov 12, 2017 7:10 pm
SlowMovingInvestor wrote:
Sun Nov 12, 2017 6:07 pm
Many ultra low loan rates seem to be offered in lieu of a rebate. So one needs to take the loss of the rebate into account when deciding whether to pay cash or not.
SlowMovingInvestor,

In my case, it is the reverse. I received an extra rebate for taking a car loan instead of paying cash.

KlangFool
I am sure it varies deepending on vehicle and dealership. When I was buying a car recently, I knew the manufacturer had a choice of 0% financing or a rebate. The salesperson didn't even mention the 0% financing, but instead said that I'd get a higher rate (I don't remember the rate exactly, but it was over 3%). I went with cash.
SlowMovingInvestor,

In my case, I was finishing up my negotiation on paying for the car with cash. Then, the dealer told me that he would throw in additional rebate if I take a car loan.

<< I knew the manufacturer had a choice of 0% financing or a rebate. >>

It is not the same kind of deal. In this case, the car loan was 1.9% but the rebate was large enough that it paid the interest plus a few hundreds more.

KlangFool

P.S.: I could pay off the car loan with my first payment and keep the rebate in this deal.

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Re: Why pay cash for a car?

Post by Slacker » Sun Nov 12, 2017 8:54 pm

scrabbler1 wrote:
Sun Nov 12, 2017 8:04 pm
What about telling the car salesman you plan to get a loan but at the last minute, after agreeing on a price, tell him you plan to pay cash? Would that work?

Put me down for paying cash anyway for the reasons others have already stated.
When you do that, if they had a deal based on the financing - they will then just reprint the contract papers with the higher "cash" price instead of the lower "financed" price.

JBTX
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Re: Why pay cash for a car?

Post by JBTX » Sun Nov 12, 2017 8:56 pm

Historically it seemed like even if the loan is zero if you pay cash you’ll get a discount.

Now last car new there was actually $1500 incentive on price to finance. So I financed the lowest amount allowable which was about $7500 and paid it off in about 3 months. The rate was not a near zero rate

If the rate really was near zero I may take the loan. However mostly buy used cars these days.

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Re: Why pay cash for a car?

Post by hushpuppy » Sun Nov 12, 2017 9:18 pm

delete
Last edited by hushpuppy on Fri Nov 17, 2017 9:42 am, edited 1 time in total.
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SlowMovingInvestor
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Re: Why pay cash for a car?

Post by SlowMovingInvestor » Sun Nov 12, 2017 9:29 pm

One more reason I'm a little wary of financing a car -- I really don't trust dealers to present loan documents honestly. Even when it comes to cash OOTD prices, I've seen dealers play games (in one cqse, adding extra $$ to taxes). But cash is easy to check. When it comes to financing (unless it's 0%), it's much harder for me to make sure in the small time I have to look at the docs in F&I that all the numbers work out.

Perhaps I'm being unnecessarily paranoid, since dealers are likely subject to TIL (Truth In Lending) laws, but I really would like to remove any extra variables that give the dealer a chance to extract money from me. It's not like a mortgage, where you have at least a day to look at loan docs.

scrabbler1
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Re: Why pay cash for a car?

Post by scrabbler1 » Sun Nov 12, 2017 9:32 pm

Slacker wrote:
Sun Nov 12, 2017 8:54 pm
scrabbler1 wrote:
Sun Nov 12, 2017 8:04 pm
What about telling the car salesman you plan to get a loan but at the last minute, after agreeing on a price, tell him you plan to pay cash? Would that work?

Put me down for paying cash anyway for the reasons others have already stated.
When you do that, if they had a deal based on the financing - they will then just reprint the contract papers with the higher "cash" price instead of the lower "financed" price.
I'm not doubting you, but it seems so ass-backwards compared to how we buy other, more common items. First, for most things we buy, we are given a price then choose to pay it however we want; the price doesn't change. Second, if there are different prices, such as for buying gasoline, the cash price is always lower than the credit price, not the other way around.

Nate79
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Re: Why pay cash for a car?

Post by Nate79 » Sun Nov 12, 2017 9:54 pm

Cash vs debt has very strong behavioral impact such that it's not all about math. Paying cash imparts pain and causes you to reexamine your purchase and helps reduce spending. This can have much more of an effect than just the math of the deal does. The auto manufacturers are not stupid, they offer below market lending rates in part to overcome that instinct to purchase a lesser priced car if forced to save and use cash.

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Re: Why pay cash for a car?

Post by mirror » Sun Nov 12, 2017 10:05 pm

To those that say pay cash does the answer change if one is in retirement and would need to pull funds from a tax deferred account? It seems the tax hit could be much greater than the low interest paid on the loan given the current interest rate environment. Emphasis on "could" because there are many factors at play.
There are two types of people: those that can extrapolate from incomplete data.

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TD2626
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Re: Why pay cash for a car?

Post by TD2626 » Sun Nov 12, 2017 10:08 pm

hushpuppy wrote:
Sun Nov 12, 2017 9:18 pm
White Coat Investor wrote:
Sun Nov 12, 2017 8:31 pm
$9/day? I hope that was a long, long time ago. Minimum wage is $100 a day in some states.

One of my points is that if you're making $9 a day you shouldn't be buying a $20K car. Actually you probably shouldn't be buying a car at all on that income. But there is some amount of money where it is no longer worth the hassle of financing to get it, right? Would you deal with 5 years of loan payments to make $100? How about $20? How about $2? We've all got a limit.
Agriculture does not have a minimum wage, at least not in the summer of 1972 in my case. Actually I made $1.60 per hour at a small textile mill in 1973 after high school graduation, when the posted minimum wage was $2.20. I guess they had an exception. It did not matter to me. I needed the money.

I agree with your point about there being some amount of money where it is no longer worth the hassle of financing to get it. However, $500 is certainly not chicken feed to all of us chickens. :) Everyone's mileage may vary. Bogleheads.org certainly provides an opportunity to determine the extent of that difference. :shock:

Best wishes,

hushpuppy

P.S. I am a low qualifying Flagship investor with Vanguard. My observations are meant to provide a different, but not better point of view. This joint could occasionally use a different perception in my opinion. Be well. :sharebeer
$1.60 per hour then to flagship status now. Congratulations on the success story.

Regarding "is $500 worth it" ---

I think that the people to whom the $500 in savings would be worth it for the hassle are also the same people for whom buying a $20k new car is not worth it when a $2k used car can provide reliable transportation from point A to point B with an $18k savings.

My opinion is - yes, pay cash for a car.

I feel debt should very much be avoided if at all possible, and since the car should be used, the cost won't be very large so paying cash wouldn't be an issue.

Car enthusiasts can of course have their hobby, but should note they are paying $2k for reliable transportation and $18k for entertainment/luxury/waste/hobby/depreciation expenses.

Slacker
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Re: Why pay cash for a car?

Post by Slacker » Mon Nov 13, 2017 1:03 am

scrabbler1 wrote:
Sun Nov 12, 2017 9:32 pm
Slacker wrote:
Sun Nov 12, 2017 8:54 pm
scrabbler1 wrote:
Sun Nov 12, 2017 8:04 pm
What about telling the car salesman you plan to get a loan but at the last minute, after agreeing on a price, tell him you plan to pay cash? Would that work?

Put me down for paying cash anyway for the reasons others have already stated.
When you do that, if they had a deal based on the financing - they will then just reprint the contract papers with the higher "cash" price instead of the lower "financed" price.
I'm not doubting you, but it seems so ass-backwards compared to how we buy other, more common items. First, for most things we buy, we are given a price then choose to pay it however we want; the price doesn't change. Second, if there are different prices, such as for buying gasoline, the cash price is always lower than the credit price, not the other way around.
I agree - I think it is a combination of something like a credit card at a small business incurs fees for them so they offer the cash discount while on the other hand, banks are still playing around with collateralized debt obligations from asset backed loans (such as car loans) so they are eager to get car dealers to push loans on customers to sell packaged up to investors.

HEDGEFUNDIE
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Re: Why pay cash for a car?

Post by HEDGEFUNDIE » Mon Nov 13, 2017 1:10 am

Surprised no one has mentioned this yet. For those with limited credit history, a car loan is a relatively cheap way to increase your credit score.

I was in my mid 20s and had a hard time getting my credit score up from the low 700s, as I all had to show on my credit history were credit cards. A 2% car loan later, and my credit score rose 100 points into the 800s (increased diversity of credit types) which helped me secure a bottom-rate mortgage. The savings on the mortgage rate definitely outweighed the interest on the car.

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