Pay cash for hvac or leverage 0% financing?

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ASpenderInRecovery
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Pay cash for hvac or leverage 0% financing?

Post by ASpenderInRecovery » Wed Apr 03, 2019 8:31 pm

Hello,

Looking for advice on whether I should leverage an 18 months 0% financing offer for an ancient (24 yr old) hvac system I’m replacing in anticipation of it failing. HVAC system depending upon the option is 7-10k. Super expensive but I got 5 bids and live in a HCOL area so that’s the going rate for a good system. Fortunately, outside of my 3.99% 30 yr fixed mortage my only debt is 6.7k auto loan at 1.99%. I have surplus in my emergency fund at Ally and can afford to pay cash for the HVAC system as is but think it could make sense to payoff the car loan instead and leverage the 0% for the system.

Should I payoff the auto loan to avoid the 1.99% interest and leverage the 0% for the HVAC replacement? If I could confortably afford to pay cash for both the HVAC and car loan payoff does it still make sense to leverage the 0% but put the 7-10k HVAC money in my taxable?

Thanks in advance for your comments and advice.

drawpoker
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Re: Pay cash for hvac or leverage 0% financing?

Post by drawpoker » Wed Apr 03, 2019 8:35 pm

What exactly is this HVAC system you are replacing?

A conventional (air source) heat pump?

pdavi21
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Re: Pay cash for hvac or leverage 0% financing?

Post by pdavi21 » Wed Apr 03, 2019 8:37 pm

Pay for the HVAC with cash back credit cards with 15-21 month 0% APR. You will get about 500-1k cash back and most of it will still be 0% APR for 15+ months.

If you can do the loan and pay off using credit cards in 18 months, even better, do that.
"We spend a great deal of time studying history, which, let's face it, is mostly the history of stupidity." -Stephen Hawking

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ASpenderInRecovery
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Re: Pay cash for hvac or leverage 0% financing?

Post by ASpenderInRecovery » Wed Apr 03, 2019 8:40 pm

drawpoker wrote:
Wed Apr 03, 2019 8:35 pm
What exactly is this HVAC system you are replacing?

A conventional (air source) heat pump?
Heat pump and air handler.

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ASpenderInRecovery
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Re: Pay cash for hvac or leverage 0% financing?

Post by ASpenderInRecovery » Wed Apr 03, 2019 8:42 pm

pdavi21 wrote:
Wed Apr 03, 2019 8:37 pm
Pay for the HVAC with cash back credit cards with 15-21 month 0% APR. You will get about 500-1k cash back and most of it will still be 0% APR for 15+ months.

If you can do the loan and pay off using credit cards in 18 months, even better, do that.
Sounds ideal but most cash back cards will only give you 1% on everyday purchases outside of a high signup bonus. Are you aware of a card that wouls get 500-1k on a 10k purchase? If so I’m very interested.

helloeveryone
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Re: Pay cash for hvac or leverage 0% financing?

Post by helloeveryone » Wed Apr 03, 2019 8:46 pm

ASpenderInRecovery wrote:
Wed Apr 03, 2019 8:42 pm
pdavi21 wrote:
Wed Apr 03, 2019 8:37 pm
Pay for the HVAC with cash back credit cards with 15-21 month 0% APR. You will get about 500-1k cash back and most of it will still be 0% APR for 15+ months.

If you can do the loan and pay off using credit cards in 18 months, even better, do that.
Sounds ideal but most cash back cards will only give you 1% on everyday purchases outside of a high signup bonus. Are you aware of a card that wouls get 500-1k on a 10k purchase? If so I’m very interested.
There are a lot of credit cards w sign up bonus for spending $x in first 3 months. That’s a pretty good idea! even better than 0% financing

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whodidntante
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Re: Pay cash for hvac or leverage 0% financing?

Post by whodidntante » Wed Apr 03, 2019 8:52 pm

ASpenderInRecovery wrote:
Wed Apr 03, 2019 8:42 pm
pdavi21 wrote:
Wed Apr 03, 2019 8:37 pm
Pay for the HVAC with cash back credit cards with 15-21 month 0% APR. You will get about 500-1k cash back and most of it will still be 0% APR for 15+ months.

If you can do the loan and pay off using credit cards in 18 months, even better, do that.
Sounds ideal but most cash back cards will only give you 1% on everyday purchases outside of a high signup bonus. Are you aware of a card that wouls get 500-1k on a 10k purchase? If so I’m very interested.
$800+ with no 0% APR
https://creditcards.chase.com/small-bus ... ?CELL=6RRW

$500 with a 0% APR
https://creditcards.chase.com/small-bus ... ?CELL=6RRW

mega317
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Re: Pay cash for hvac or leverage 0% financing?

Post by mega317 » Wed Apr 03, 2019 8:53 pm

I just got $500 for 3k spend on a Capital One Savor.

You can also use a credit card with a 0% intro APR so you'd get points for the purchase and still get a 12-18 mo 0% loan.
https://www.bogleheads.org/forum/viewtopic.php?t=6212

drawpoker
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Re: Pay cash for hvac or leverage 0% financing?

Post by drawpoker » Wed Apr 03, 2019 9:08 pm

Okay.

Couple of things to keep in mind when getting a heat pump installation - both outdoor and indoor components.

# 1 You said you will be replacing a unit that is like 24-plus years, right? Have you ( or your contractor) checked to make sure the existing hole into your house will fit the newer( and gov't mandated) models of heat pumps with the R-410A refrigerant? This was the unpleasant surprise I got. After signing contract for what I thought was a good price; the slick salesman neglected to mention this - when the installers showed up they delivered the bad news.

(Thank Gawd, there was a interior closet within a few feet that could accommodate the new "hole" needed for the unit. )

#2 You definitely do not want to pay cash for this job! Despite the warranties you should get (both from the manufacturer and the installer for the labor part) you might find some problems, some service calls needed, some adjustments, etc. etc.
If you have already paid in full - this leaves you at some disadvantage. So, don't do it.

#3 Give yourself some breathing room, like, as already suggested, put the entire tab on a 0% APR credit card you already have.
Think carefully before accepting the vendor's offer of "0% Financing for XXX months". Usually, this means that they will "sell the paper" to some 3rd party - some of which you don't want appearing on your credit report. It's not "Household Finance" anymore, the names change, but the net effect on your FICO score is the same - they are regarded as very sub-prime,
lenders of the last resort, or somesuch. Just barely above the car title, or the infamous "pay day" loan offices.

It could needlessly cause your FICO score to drop. :(

djheini
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Re: Pay cash for hvac or leverage 0% financing?

Post by djheini » Wed Apr 03, 2019 9:21 pm

ASpenderInRecovery wrote:
Wed Apr 03, 2019 8:42 pm
Sounds ideal but most cash back cards will only give you 1% on everyday purchases outside of a high signup bonus. Are you aware of a card that wouls get 500-1k on a 10k purchase? If so I’m very interested.
Others have posted about sign up bonuses, but 2% is not an uncommon cash back rate. Citi Double Cash and Fidelity's visa both have 2% back on all purchases with no annual fee.

pdavi21
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Re: Pay cash for hvac or leverage 0% financing?

Post by pdavi21 » Wed Apr 03, 2019 9:55 pm

ASpenderInRecovery wrote:
Wed Apr 03, 2019 8:42 pm
pdavi21 wrote:
Wed Apr 03, 2019 8:37 pm
Pay for the HVAC with cash back credit cards with 15-21 month 0% APR. You will get about 500-1k cash back and most of it will still be 0% APR for 15+ months.

If you can do the loan and pay off using credit cards in 18 months, even better, do that.
Sounds ideal but most cash back cards will only give you 1% on everyday purchases outside of a high signup bonus. Are you aware of a card that wouls get 500-1k on a 10k purchase? If so I’m very interested.
EDIT: Cap1 Savor 500 bonus off 3k spend. You do NOT get 0 APR, you must pay in full.

I'm suggesting doing 2-3 signup bonuses and paying with multiple cards.

My main point wasn't that you should do the credit cards. I was more saying why waste time on the loan when you can waste less time for more money on CC promos? If you can do both, that would be best, but you'd have to make sure 1) loan can be paid with CC and 2) Good CC promos will still be around in 1.5 years.
"We spend a great deal of time studying history, which, let's face it, is mostly the history of stupidity." -Stephen Hawking

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Re: Pay cash for hvac or leverage 0% financing?

Post by SevenBridgesRoad » Wed Apr 03, 2019 10:02 pm

:confused Wow, once again, people are different and nowhere more apparent than here! I think the advice you are receiving is ridiculous, but I can see for some it's not. Maybe it's generational. I would pay cash, be done with it and sleep very well at night. I would never think even one second about it again.
Retired 2018 age 61 / VPW / VTINX mirrored / No mortgage. No debt / Good enough | "Not using an alarm is one of the great glories of my life." Robert Greene

mega317
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Re: Pay cash for hvac or leverage 0% financing?

Post by mega317 » Wed Apr 03, 2019 10:03 pm

drawpoker wrote:
Wed Apr 03, 2019 9:08 pm
#2 You definitely do not want to pay cash for this job!...
If you have already paid in full - this leaves you at some disadvantage. So, don't do it.
#3 Give yourself some breathing room, like, as already suggested, put the entire tab on a 0% APR credit card you already have.
These statements seem contradictory.
https://www.bogleheads.org/forum/viewtopic.php?t=6212

drawpoker
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Re: Pay cash for hvac or leverage 0% financing?

Post by drawpoker » Wed Apr 03, 2019 10:46 pm

Contradictory? Not at all.

If the OP pays cash, that's the end of it.

If he uses a 0% APR card, he has an immediate advocate if he has any problems with installation/service.

If anything isn't right, to his satisfaction, all he has to do is dispute the charge on his cc -

The notice of possible "charge back" - which will go straight to the vendor - the HVAC company - will surely get their attention

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Re: Pay cash for hvac or leverage 0% financing?

Post by SevenBridgesRoad » Wed Apr 03, 2019 11:22 pm

Sigh. Yes, of course. I don't meet vendors at a dark street corner with actual duffel bags of dollar bills and gold coins. I should have been more precise. I put almost everything on CC these days and pay in full the next billing date. No interest charged or paid. HVAC replacement would be no different. It goes on the credit card, if they'll accept it. Points, miles, protections. I count a CC payment paid same month as cash, only better. Pay the bill with the credit card but pay it off in full first cycle. The money is in checking and comes out autopay. Get CC protections, get one billing cycle float, but I don't play CC premium games and I don't suggest you turn this into a real loan beyond the month float. No games, no hassles, no keeping track of stuff. Same as cash with no games.
Retired 2018 age 61 / VPW / VTINX mirrored / No mortgage. No debt / Good enough | "Not using an alarm is one of the great glories of my life." Robert Greene

mega317
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Re: Pay cash for hvac or leverage 0% financing?

Post by mega317 » Wed Apr 03, 2019 11:30 pm

drawpoker wrote:
Wed Apr 03, 2019 10:46 pm
If he uses a 0% APR card, he has an immediate advocate if he has any problems with installation/service.

If anything isn't right, to his satisfaction, all he has to do is dispute the charge on his cc -
Fair, I guess. I didn't think the credit card would help for anything beyond essentially provable negligence or misrepresentation of services.
https://www.bogleheads.org/forum/viewtopic.php?t=6212

Nissanzx1
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Re: Pay cash for hvac or leverage 0% financing?

Post by Nissanzx1 » Thu Apr 04, 2019 4:44 am

Pay off car loan first, then pay cash for HVAC. If it’s still working, it’s not yet an emergency...

You will do better in life if you avoid going into debt (especially for consumable items like cars and HVAC). Don’t even let the option seep into your mind. That means more money to invest for you and your family.

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Re: Pay cash for hvac or leverage 0% financing?

Post by RickBoglehead » Thu Apr 04, 2019 4:51 am

pdavi21 wrote:
Wed Apr 03, 2019 8:37 pm
Pay for the HVAC with cash back credit cards with 15-21 month 0% APR. You will get about 500-1k cash back and most of it will still be 0% APR for 15+ months.

If you can do the loan and pay off using credit cards in 18 months, even better, do that.
Splitting across cards impacts additional warranty provided by them. Citi adds 2 years.
Avid user of forums on variety of interests-financial, home brewing, F-150, PHEV, home repair, etc. Enjoy learning & passing on knowledge. It's PRINCIPAL, not PRINCIPLE. I ADVISE you to seek ADVICE.

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Re: Pay cash for hvac or leverage 0% financing?

Post by Rockman » Thu Apr 04, 2019 5:03 am

I just replaced my HVAC system a few months ago and the Carrier dealer offered 0% financing thru Wells Fargo. This was 10k and a 72 month plan. Very low payments required and no problems. This is a nation wide program I am told. Would rather use their money than mine. I understand Trane also had a similar offer when I got a few quotes.

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ASpenderInRecovery
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Re: Pay cash for hvac or leverage 0% financing?

Post by ASpenderInRecovery » Thu Apr 04, 2019 5:09 am

Rockman wrote:
Thu Apr 04, 2019 5:03 am
I just replaced my HVAC system a few months ago and the Carrier dealer offered 0% financing thru Wells Fargo. This was 10k and a 72 month plan. Very low payments required and no problems. This is a nation wide program I am told. Would rather use their money than mine. I understand Trane also had a similar offer when I got a few quotes.
Very similar program being offered so I assumed little risk with WF. Only difference is only 18 month term.

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ASpenderInRecovery
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Re: Pay cash for hvac or leverage 0% financing?

Post by ASpenderInRecovery » Thu Apr 04, 2019 5:14 am

Nissanzx1 wrote:
Thu Apr 04, 2019 4:44 am
Pay off car loan first, then pay cash for HVAC. If it’s still working, it’s not yet an emergency...

You will do better in life if you avoid going into debt (especially for consumable items like cars and HVAC). Don’t even let the option seep into your mind. That means more money to invest for you and your family.
I agree it’s not an emergency but based on it’s age it’s running on borrowed time. My thinking is I preempt it breaking and buy during the low season to capture the rebates and incentives because the providers are needing the work now. My assumption was if you wait till it breaks in July/August there will be a premium and you have lost any negotiation power.

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Re: Pay cash for hvac or leverage 0% financing?

Post by 6Pack » Thu Apr 04, 2019 5:18 am

ASpenderInRecovery wrote:
Thu Apr 04, 2019 5:14 am
Nissanzx1 wrote:
Thu Apr 04, 2019 4:44 am
Pay off car loan first, then pay cash for HVAC. If it’s still working, it’s not yet an emergency...

You will do better in life if you avoid going into debt (especially for consumable items like cars and HVAC). Don’t even let the option seep into your mind. That means more money to invest for you and your family.
I agree it’s not an emergency but based on it’s age it’s running on borrowed time. My thinking is I preempt it breaking and buy during the low season to capture the rebates and incentives because the providers are needing the work now. My assumption was if you wait till it breaks in July/August there will be a premium and you have lost any negotiation power.
That’s exactly what we did. I was able to negotiate a better deal by paying cash vs the 0% offer. Ask him what his cash price is.

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ASpenderInRecovery
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Re: Pay cash for hvac or leverage 0% financing?

Post by ASpenderInRecovery » Thu Apr 04, 2019 5:22 am

pdavi21 wrote:
Wed Apr 03, 2019 9:55 pm
ASpenderInRecovery wrote:
Wed Apr 03, 2019 8:42 pm
pdavi21 wrote:
Wed Apr 03, 2019 8:37 pm
Pay for the HVAC with cash back credit cards with 15-21 month 0% APR. You will get about 500-1k cash back and most of it will still be 0% APR for 15+ months.

If you can do the loan and pay off using credit cards in 18 months, even better, do that.
Sounds ideal but most cash back cards will only give you 1% on everyday purchases outside of a high signup bonus. Are you aware of a card that wouls get 500-1k on a 10k purchase? If so I’m very interested.
EDIT: Cap1 Savor 500 bonus off 3k spend. You do NOT get 0 APR, you must pay in full.

I'm suggesting doing 2-3 signup bonuses and paying with multiple cards.

My main point wasn't that you should do the credit cards. I was more saying why waste time on the loan when you can waste less time for more money on CC promos? If you can do both, that would be best, but you'd have to make sure 1) loan can be paid with CC and 2) Good CC promos will still be around in 1.5 years.
I agree the CC option provides better incentives than simply spreading out the payments for 0%. The recent high signup bonuses I’ve been eying for a CC that would make sense for my habits don’t offer 0% so it would become a same as cash transaction as I’d pay it off within the statement cycle. The benefit being like you said roughly 1k in incentives. I’m hesistant to open multiple CCs as I opened a United CC card last year because of work travel incentives and try to limit my hard inquiries.

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ASpenderInRecovery
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Re: Pay cash for hvac or leverage 0% financing?

Post by ASpenderInRecovery » Thu Apr 04, 2019 5:25 am

6Pack wrote:
Thu Apr 04, 2019 5:18 am
ASpenderInRecovery wrote:
Thu Apr 04, 2019 5:14 am
Nissanzx1 wrote:
Thu Apr 04, 2019 4:44 am
Pay off car loan first, then pay cash for HVAC. If it’s still working, it’s not yet an emergency...

You will do better in life if you avoid going into debt (especially for consumable items like cars and HVAC). Don’t even let the option seep into your mind. That means more money to invest for you and your family.
I agree it’s not an emergency but based on it’s age it’s running on borrowed time. My thinking is I preempt it breaking and buy during the low season to capture the rebates and incentives because the providers are needing the work now. My assumption was if you wait till it breaks in July/August there will be a premium and you have lost any negotiation power.
That’s exactly what we did. I was able to negotiate a better deal by paying cash vs the 0% offer. Ask him what his cash price is.
Good call. Ther was a small cash discount with one provider while the other claims to offer no additional discounts on cash or credit card payment. I’ll have to revisit that discussion.

andypanda
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Re: Pay cash for hvac or leverage 0% financing?

Post by andypanda » Thu Apr 04, 2019 5:29 am

I just bought a Lennox heat pump, air handler and wifi thermostat for my new wife's old house. And I had them tear out the old duct board and flex duct work and install insulated galvanized steel pipe in the crawl space. I wrote a check and they knocked 3% off the whole deal. And I qualified for the $900 rebate from Lennox - a prepaid Visa card.

Otoh, it's a well established business I've used before. I smiled and told them I know where to send my lawyer if the installer screws up badly. So far it's a great system. Even my wife and dog like it. 8-)

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ASpenderInRecovery
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Re: Pay cash for hvac or leverage 0% financing?

Post by ASpenderInRecovery » Thu Apr 04, 2019 5:37 am

andypanda wrote:
Thu Apr 04, 2019 5:29 am
I just bought a Lennox heat pump, air handler and wifi thermostat for my new wife's old house. And I had them tear out the old duct board and flex duct work and install insulated galvanized steel pipe in the crawl space. I wrote a check and they knocked 3% off the whole deal. And I qualified for the $900 rebate from Lennox - a prepaid Visa card.

Otoh, it's a well established business I've used before. I smiled and told them I know where to send my lawyer if the installer screws up badly. So far it's a great system. Even my wife and dog like it. 8-)
Thanks Andy. That’s essentially the same system I’m considering buying. Good to know you are enjoying it thus far. The Lennox dealer is the most reputable, highest certified, and was the most thorough actually doing a load calc. I was tempted to do the same and cut a check but they already gave me a 10% off + the offered rebate because I shower them my other lower bids. They claim to be at their discounting floor. I’ll be testing that further.

andypanda
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Re: Pay cash for hvac or leverage 0% financing?

Post by andypanda » Thu Apr 04, 2019 5:57 am

That's sounds good. I tried for a hefty discount, but they countered that they have 4 installation crews who stay busy and they don't need to deal. And the local home show was coming up the following weekend and that usually results in about 400 new leads for the 4 salesmen. By April the installers are rolling all the way into fall without a break. Yeah, some of it is probably hype, but it's mostly true from what I've seen.

And they have to pay for the six acres near the county air park with the new 20,000 sq.ft. building. :happy But they do stock parts, which is a big plus and additional overhead. They also employ a couple of plumbers and electricians if something comes up or you need a small project done on short notice.

Good luck with your project.

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Re: Pay cash for hvac or leverage 0% financing?

Post by Kosmo » Thu Apr 04, 2019 6:53 am

I say to take the financing. About 4 years ago I replaced my HVAC and took the financing. 1 year at 0%, no payments. It was just under $12k. The company only accepted a partial payment on credit card, which I did for some unrelated ventilation work. Then a year later I had to replace the HVAC in my rental. That was $5500 and I used a 0% credit card check (so I did pay a small fee) and spread the payments over 18 months. This was done by a friend of a friend who installed these on the side (he is an HVAC tech). He was cash only.

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Re: Pay cash for hvac or leverage 0% financing?

Post by Nissanzx1 » Thu Apr 04, 2019 7:17 am

ASpenderInRecovery wrote:
Thu Apr 04, 2019 5:14 am
Nissanzx1 wrote:
Thu Apr 04, 2019 4:44 am
Pay off car loan first, then pay cash for HVAC. If it’s still working, it’s not yet an emergency...

You will do better in life if you avoid going into debt (especially for consumable items like cars and HVAC). Don’t even let the option seep into your mind. That means more money to invest for you and your family.
I agree it’s not an emergency but based on it’s age it’s running on borrowed time. My thinking is I preempt it breaking and buy during the low season to capture the rebates and incentives because the providers are needing the work now. My assumption was if you wait till it breaks in July/August there will be a premium and you have lost any negotiation power.
I can tell you from experience, your system could easily last 3,5, or even more years. I have one rental that has 1980’s Furnace and A/C. Still works perfectly. I decided to replace it before another tenant moves in. I got 5 bids. Price ranges were $3750-$6200 for complete system. They install Wednesday but I will write a check.

There are ALWAYS rebates and incentives. There is no other more important negotiation power than 100 Dollar bills. I’m sorry but this is not an emergency. I mean, using your logic here you should also buy a new car because yours is 8 years old and could break down... ALL the value in an item like this’ ownership cycle (HVAC, cars) is near the end.

Just to humor me, what exactly is the reason you feel that the system is on last legs? What brand name is your current system?

onourway
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Re: Pay cash for hvac or leverage 0% financing?

Post by onourway » Thu Apr 04, 2019 7:25 am

Taking your username into account, I would back off. This isn't an emergency. You don't need to replace a functional system today. Start saving the amount you'd pay if you took the loan every month so you have most if not all of the cash available to replace it at some point in the future when it genuinely needs it.

andrewon
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Re: Pay cash for hvac or leverage 0% financing?

Post by andrewon » Thu Apr 04, 2019 7:27 am

0% financing is not 0%. It's already priced in.

You should ask what's the discount if you paid in full up front.

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djpeteski
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Re: Pay cash for hvac or leverage 0% financing?

Post by djpeteski » Thu Apr 04, 2019 7:28 am

Have you asked your bidders if there is a difference in a cash price or not?

As others have said there are cash back credit cards in the 2% range, but if you can get 5% off the price by paying cash that would be a better deal.

Given that most of these places outsource the financing and pay a decent rate to the credit card companies, they might be willing to give a 5% discount.

pdavi21
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Re: Pay cash for hvac or leverage 0% financing?

Post by pdavi21 » Thu Apr 04, 2019 7:38 am

RickBoglehead wrote:
Thu Apr 04, 2019 4:51 am
pdavi21 wrote:
Wed Apr 03, 2019 8:37 pm
Pay for the HVAC with cash back credit cards with 15-21 month 0% APR. You will get about 500-1k cash back and most of it will still be 0% APR for 15+ months.

If you can do the loan and pay off using credit cards in 18 months, even better, do that.
Splitting across cards impacts additional warranty provided by them. Citi adds 2 years.
My recent HVAC installation had a 5-15 year warranty from the installer.
"We spend a great deal of time studying history, which, let's face it, is mostly the history of stupidity." -Stephen Hawking

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RickBoglehead
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Re: Pay cash for hvac or leverage 0% financing?

Post by RickBoglehead » Thu Apr 04, 2019 7:40 am

pdavi21 wrote:
Thu Apr 04, 2019 7:38 am
RickBoglehead wrote:
Thu Apr 04, 2019 4:51 am
pdavi21 wrote:
Wed Apr 03, 2019 8:37 pm
Pay for the HVAC with cash back credit cards with 15-21 month 0% APR. You will get about 500-1k cash back and most of it will still be 0% APR for 15+ months.

If you can do the loan and pay off using credit cards in 18 months, even better, do that.
Splitting across cards impacts additional warranty provided by them. Citi adds 2 years.
My recent HVAC installation had a 5-15 year warranty from the installer.
That's great. The Citi card would have made that a 7-15 warranty (warranties up to 5 years are extended by 2 years).
Avid user of forums on variety of interests-financial, home brewing, F-150, PHEV, home repair, etc. Enjoy learning & passing on knowledge. It's PRINCIPAL, not PRINCIPLE. I ADVISE you to seek ADVICE.

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Re: Pay cash for hvac or leverage 0% financing?

Post by GatorFL » Thu Apr 04, 2019 7:43 am

I negotiated 3% off the price as part of the new system instead of the 0% financing last year on my new Trane system. I went with a trusted company and I learned two important things:

1. Duct work: In looking over the new system, it is vital to have all of the duct work inspected. My HVAC folks started with an infrared scan inside the house looking for leaks and then did a thorough leak test and inspection of the duct work in the attic. It turns out that I had some leaky runs. The HVAC company stated that 90% of people just swap the outside/inside unit and end up blowing air more efficiently into their attic. Here in Florida, that means mold. I was able to get all of the duct work repaired and ready for the new system for a few hundred dollars. Best money spent....

2. Extended Maintenance: I took the savings on the cash deal and rolled it into a 10 year end to end service contract that includes annual cleanings. I am not a big believer in extended warranty, but based on the complexity of these new systems, I decided to opt for it.

Good luck with the new system! I am saving 30% on my electric bill, and with the new variable speed scroll compressor, the air is much quieter and evenly distributed through the house.
Gator

pdavi21
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Re: Pay cash for hvac or leverage 0% financing?

Post by pdavi21 » Thu Apr 04, 2019 7:44 am

RickBoglehead wrote:
Thu Apr 04, 2019 7:40 am
pdavi21 wrote:
Thu Apr 04, 2019 7:38 am
RickBoglehead wrote:
Thu Apr 04, 2019 4:51 am
pdavi21 wrote:
Wed Apr 03, 2019 8:37 pm
Pay for the HVAC with cash back credit cards with 15-21 month 0% APR. You will get about 500-1k cash back and most of it will still be 0% APR for 15+ months.

If you can do the loan and pay off using credit cards in 18 months, even better, do that.
Splitting across cards impacts additional warranty provided by them. Citi adds 2 years.
My recent HVAC installation had a 5-15 year warranty from the installer.
That's great. The Citi card would have made that a 7-15 warranty (warranties up to 5 years are extended by 2 years).
Not worth it. Warrantees are a ripoff. I tried to negotiate mine away, but they wouldn't lower the price.

EDIT: That being said, the Citi Double Cash is a great card for OP to use. 2% cash back and 21 month 0 APR promo. Since the OP seems to want 0 APR more than CB bonuses. It would be a great choice, and if there is a Warranty bonus, that woukd be gravy. Plus everyone should get a 2% card eventually.

I actually paid for mine with Citi Double Cash. I had just found out about the 5/24 rule the hard way and didn't have enough time to reapply.
"We spend a great deal of time studying history, which, let's face it, is mostly the history of stupidity." -Stephen Hawking

Topic Author
ASpenderInRecovery
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Re: Pay cash for hvac or leverage 0% financing?

Post by ASpenderInRecovery » Thu Apr 04, 2019 8:52 am

Nissanzx1 wrote:
Thu Apr 04, 2019 7:17 am
ASpenderInRecovery wrote:
Thu Apr 04, 2019 5:14 am
Nissanzx1 wrote:
Thu Apr 04, 2019 4:44 am
Pay off car loan first, then pay cash for HVAC. If it’s still working, it’s not yet an emergency...

You will do better in life if you avoid going into debt (especially for consumable items like cars and HVAC). Don’t even let the option seep into your mind. That means more money to invest for you and your family.
I agree it’s not an emergency but based on it’s age it’s running on borrowed time. My thinking is I preempt it breaking and buy during the low season to capture the rebates and incentives because the providers are needing the work now. My assumption was if you wait till it breaks in July/August there will be a premium and you have lost any negotiation power.
I can tell you from experience, your system could easily last 3,5, or even more years. I have one rental that has 1980’s Furnace and A/C. Still works perfectly. I decided to replace it before another tenant moves in. I got 5 bids. Price ranges were $3750-$6200 for complete system. They install Wednesday but I will write a check.

There are ALWAYS rebates and incentives. There is no other more important negotiation power than 100 Dollar bills. I’m sorry but this is not an emergency. I mean, using your logic here you should also buy a new car because yours is 8 years old and could break down... ALL the value in an item like this’ ownership cycle (HVAC, cars) is near the end.

Just to humor me, what exactly is the reason you feel that the system is on last legs? What brand name is your current system?
I welcome this healthy debate and have questioned whether I am jumping the gun on this one. Besides the fact that it's 24 years old it was originally cited by my home inspector as needing replacing and that was 3+ years ago. Since then it's been repaired once for producing heat while it was supposed to be cooling. It struggles to push cold air to my 3rd floor where all my bedrooms are. Lastly it has a mold problem in the air handler that we've treated several times but cannot seem to fully eradicate. To your point, it's old but it ain't dead.

Topic Author
ASpenderInRecovery
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Re: Pay cash for hvac or leverage 0% financing?

Post by ASpenderInRecovery » Thu Apr 04, 2019 8:58 am

onourway wrote:
Thu Apr 04, 2019 7:25 am
Taking your username into account, I would back off. This isn't an emergency. You don't need to replace a functional system today. Start saving the amount you'd pay if you took the loan every month so you have most if not all of the cash available to replace it at some point in the future when it genuinely needs it.
It's a good point similar to what Nissan is saying. Which is why I posted this as I welcome the healthy debate. I have sufficient cash to pay for it out of checking today and excess in my emergency fund/cash reserves to pay for it down the road if I decide to just chunk the 10k into taxable.

My thinking as if I waited, and it breaks in the middle of the summer the price will inevitably be higher and in the meantime we'd be miserable.

Devil's advocate, don't I end up "ahead" if Ally pays me 2.2% and I'm paying PenFed 1.99% for the auto loan? Whether the 10k goes into Ally or my taxable and I have no issues paying the 0% loan for the HVAC you are likely to outperform the 0%.

onourway
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Re: Pay cash for hvac or leverage 0% financing?

Post by onourway » Thu Apr 04, 2019 9:38 am

ASpenderInRecovery wrote:
Thu Apr 04, 2019 8:58 am
onourway wrote:
Thu Apr 04, 2019 7:25 am
Taking your username into account, I would back off. This isn't an emergency. You don't need to replace a functional system today. Start saving the amount you'd pay if you took the loan every month so you have most if not all of the cash available to replace it at some point in the future when it genuinely needs it.
It's a good point similar to what Nissan is saying. Which is why I posted this as I welcome the healthy debate. I have sufficient cash to pay for it out of checking today and excess in my emergency fund/cash reserves to pay for it down the road if I decide to just chunk the 10k into taxable.

My thinking as if I waited, and it breaks in the middle of the summer the price will inevitably be higher and in the meantime we'd be miserable.

Devil's advocate, don't I end up "ahead" if Ally pays me 2.2% and I'm paying PenFed 1.99% for the auto loan? Whether the 10k goes into Ally or my taxable and I have no issues paying the 0% loan for the HVAC you are likely to outperform the 0%.
The amount you come out ahead is not worth the hassle of keeping a small loan like this. When you pay cash (not literally, but pay the credit card off that month) people tend to make more conservative financial choices than when they finance something. You chose your username for a reason. Considering you view yourself that way, I would avoid taking out consumer debt and instead pay for things when you have the cash saved.

Topic Author
ASpenderInRecovery
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Joined: Sat Jul 29, 2017 9:17 am

Re: Pay cash for hvac or leverage 0% financing?

Post by ASpenderInRecovery » Thu Apr 04, 2019 10:13 am

onourway wrote:
Thu Apr 04, 2019 9:38 am
ASpenderInRecovery wrote:
Thu Apr 04, 2019 8:58 am
onourway wrote:
Thu Apr 04, 2019 7:25 am
Taking your username into account, I would back off. This isn't an emergency. You don't need to replace a functional system today. Start saving the amount you'd pay if you took the loan every month so you have most if not all of the cash available to replace it at some point in the future when it genuinely needs it.
It's a good point similar to what Nissan is saying. Which is why I posted this as I welcome the healthy debate. I have sufficient cash to pay for it out of checking today and excess in my emergency fund/cash reserves to pay for it down the road if I decide to just chunk the 10k into taxable.

My thinking as if I waited, and it breaks in the middle of the summer the price will inevitably be higher and in the meantime we'd be miserable.

Devil's advocate, don't I end up "ahead" if Ally pays me 2.2% and I'm paying PenFed 1.99% for the auto loan? Whether the 10k goes into Ally or my taxable and I have no issues paying the 0% loan for the HVAC you are likely to outperform the 0%.
The amount you come out ahead is not worth the hassle of keeping a small loan like this. When you pay cash (not literally, but pay the credit card off that month) people tend to make more conservative financial choices than when they finance something. You chose your username for a reason. Considering you view yourself that way, I would avoid taking out consumer debt and instead pay for things when you have the cash saved.
That makes sense and I appreciate your advice. The reason I seek advice is the desire to make better financial decisions than I made in the past. At the time I took the 1.99% loan I saw it as coming out ahead in a rising interest rate environment. I also was stashing excess cash to pay for my wife's car outright which we did accomplish in February. That felt very good. Now I'm in a position where I could pay cash for both the HVAC and payoff the car loan and still have 8+ months emergency fund. Perhaps I'm overthinking it but I thought I would come out even further ahead by leveraging 0% and adding more to my taxable.

Topic Author
ASpenderInRecovery
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Re: Pay cash for hvac or leverage 0% financing?

Post by ASpenderInRecovery » Thu Apr 04, 2019 11:27 am

pdavi21 wrote:
Thu Apr 04, 2019 7:44 am
RickBoglehead wrote:
Thu Apr 04, 2019 7:40 am
pdavi21 wrote:
Thu Apr 04, 2019 7:38 am
RickBoglehead wrote:
Thu Apr 04, 2019 4:51 am
pdavi21 wrote:
Wed Apr 03, 2019 8:37 pm
Pay for the HVAC with cash back credit cards with 15-21 month 0% APR. You will get about 500-1k cash back and most of it will still be 0% APR for 15+ months.

If you can do the loan and pay off using credit cards in 18 months, even better, do that.
Splitting across cards impacts additional warranty provided by them. Citi adds 2 years.
My recent HVAC installation had a 5-15 year warranty from the installer.
That's great. The Citi card would have made that a 7-15 warranty (warranties up to 5 years are extended by 2 years).
Not worth it. Warrantees are a ripoff. I tried to negotiate mine away, but they wouldn't lower the price.

EDIT: That being said, the Citi Double Cash is a great card for OP to use. 2% cash back and 21 month 0 APR promo. Since the OP seems to want 0 APR more than CB bonuses. It would be a great choice, and if there is a Warranty bonus, that woukd be gravy. Plus everyone should get a 2% card eventually.

I actually paid for mine with Citi Double Cash. I had just found out about the 5/24 rule the hard way and didn't have enough time to reapply.
Funny enough I've tried the same thing with the front-runner asking them to remove the extended labor warranty believing it is inflating the price. Unfortunately it's part of the package and "cannot be removed'. I'm not done negotiating with them and may delay the project altogether in favor of just letting the unit fail based on some others suggestions.

I do agree with your idea of using a CC to get cashback or qualify for a signup bonus as the 0% financing simply buys time.

quantAndHold
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Re: Pay cash for hvac or leverage 0% financing?

Post by quantAndHold » Thu Apr 04, 2019 11:38 am

Our furnace ran for 70 years before it needed to be replaced. The current one is at 20, and still looks brand new.

I would wait until it breaks. Then run NPV calculations on the options available at the time, and choose the best deal.
Yes, I’m really that pedantic.

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8foot7
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Re: Pay cash for hvac or leverage 0% financing?

Post by 8foot7 » Thu Apr 04, 2019 12:18 pm

If it ain't broke, don't fix it. I know of several 30+ year old systems that, with an occasional problem, run fine. I would absolutely not replace an entire system until it was well and truly fried. That could be a decade from now. Yes, it could be a month. But why make something a problem until it is.

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