Go for the Honda 0.9% APR loan or pay cash? 35k minivan

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Topic Author
doss
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Go for the Honda 0.9% APR loan or pay cash? 35k minivan

Post by doss »

I am looking at purchasing a new 2020 Honda minivan for $35k. I have saved up cash to pay it outright, but Honda is offering 0.9% APR for up to 60 months. Is there a consensus as to whether one should go for the loan or buy the car outright with cash?

I have 130k saved in a savings account (maybe to use for investments, new house, etc) , a 130k mortgage (1041/mo), and 470k in retirement savings at age 40 with 2 kids and 1 SAHM. Currently own two cars, both paid off since 2012 (one of the cars I can only get for $100!). I will take over my wife's 2006 Volvo S60.

I am looking at purchasing today, so would be great to get some feedback as soon as possible. Thank you!
“ The long-term 9%-10% nominal return of the stock market INCLUDES the crashes.” — calvin+hobbs
petulant
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Re: Go for the Honda 0.9% APR loan or pay cash? 35k minivan

Post by petulant »

Here are the general BH responses in summary form:

1. Do you really need a new car? Most likely you could get a very similar used minivan for much less. Then again, happy wife, happy life.

2. Do you really want a car payment? This will be a psychological drag and not helpful. Consumer debt is to be avoided.

3. Don't trust the low interest rate. Have you tried knocking the price down? Attractive interest rates are probably hiding the fact that you didn't get a lower price during negotiation. (Contra this point, Japanese companies have negative interest rates in Japan and are more likely to want USD receivables on balance sheet.)

4. That interest rate is very low, lower than margin, mortgages, and almost anything except borrowing through derivatives. Get the 60-month period and use it to keep your savings account liquid and portfolio invested. Your emergency fund can cover the payments if you lose your job. (Some will cry foul on this one.)

In your shoes I probably would have stopped at "brand new $35K minivan," but barring that, I would look closely at a loan with that interest rate.
flyphotoguy
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Re: Go for the Honda 0.9% APR loan or pay cash? 35k minivan

Post by flyphotoguy »

I would buy used (durable & reliable brands like toyota/honda) and pay cash but for some, 0.9% is low enough where they'd rather pay monthly and leave the rest in investments. Good luck.
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Stinky
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Re: Go for the Honda 0.9% APR loan or pay cash? 35k minivan

Post by Stinky »

Is the dealer's out-the-door price the same whether financed or not? Sometimes they will give a better price for one or the other.

I don't like debt, so if the price is the same, I'd pay cash. But that's just me.
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momvesting
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Re: Go for the Honda 0.9% APR loan or pay cash? 35k minivan

Post by momvesting »

I had a similar situation several years ago with my Honda Pilot. Call and get insurance quotes. My insurance was significantly cheaper with a $1000 deductible than it was with a $500 deductible, and the financing required a $500 deductible. When I asked my insurance carrier why the $1000 deductible was so much cheaper, they said that in risk analysis, a $1000 deductible means you didn't finance, and statistically that makes you a lower risk. There was very little difference in price between the $1000 and the $2500 deductibles, so I ended up paying cash and getting a $1000 deductible.

Also, ask the dealer if they can go lower one way or the other. Sometimes they can go a few hundred lower without financing, but other times they are earning a small commission for getting you to finance, so they will go lower with financing.
adamthesmythe
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Re: Go for the Honda 0.9% APR loan or pay cash? 35k minivan

Post by adamthesmythe »

I would negotiate the price first in the more usual way (which is probably financed) and then ask if it would be the same for cash.

Sometimes it will be, sometimes not. If not I would take the financing (and maybe pay it off later).

BTW I have never financed a car.
babadi
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Re: Go for the Honda 0.9% APR loan or pay cash? 35k minivan

Post by babadi »

When I bought a car a few years ago, the manufacturer was offering 0% financing, so I took it. I didn't enjoy the cognitive overhead of owing money and having another payment to make every month. While it's true that I got to keep that money in the bank earning (almost no) interest, it wasn't worth the trouble to me.

When I had the opportunity to make the same decision again when I bought another car a few weeks ago, I decided to just write the big check. While I waffled on it a bit, it ultimately felt like taking the 0% financing was a way of pretending I didn't spend the money. I figured that if I didn't want the car enough to write the check, I shouldn't be buying it.

[edit] Also, I would second the other comments about exploring whether the price is really the same with or without the financing. In my case, an additional $500 rebate was available for a cash purchase.
Tingting1013
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Re: Go for the Honda 0.9% APR loan or pay cash? 35k minivan

Post by Tingting1013 »

Are there any loan origination fees?

Is there a prepayment penalty?
fundseeker
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Re: Go for the Honda 0.9% APR loan or pay cash? 35k minivan

Post by fundseeker »

If you pay cash you don't have to deal with the risk of them slipping in GAP insurance or finding some other way to screw you over. And, your time with the F&I guy will be much shorter by paying cash.

BUT, you'll still have to sit in there with him a long time for him to hard sell you on various warranties for paint, bent rims, etc. It is probably worse than going to a house closing. I went through this last fall with our Pilot when we paid cash, and I can see how some poor unsuspecting customers fall for it.

Let me suggest that you DO NOT buy their warranty. You can buy a real Honda factory warranty online for probably half what they want, and you can wait for three years before even doing that.

Last thought - I assume you have your out the door (OTD) price already, as though it's a cash deal and you just need to know how much your cashier's check should be for. If you don't, how can you compare apples to apples between dealers? And, to your benefit, you are at the end of the month, so they'll knock off some money just to close another deal.

Good luck!!!
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gr7070
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Re: Go for the Honda 0.9% APR loan or pay cash? 35k minivan

Post by gr7070 »

There will be no consensus on this one.

I'd pay cash, especially with 130k doing nothing.

I've seen where dealers offer a rebate or low finance rates. Any chance there's a rebate instead of the loan?

At the end of the day, do whichever you prefer. It's not a big enough difference to override your preference.
Last edited by gr7070 on Wed Aug 26, 2020 2:30 pm, edited 1 time in total.
Topic Author
doss
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Re: Go for the Honda 0.9% APR loan or pay cash? 35k minivan

Post by doss »

Thanks,guys! Also did not know about not having to buy the Honda warranty right now. I'll definitely wait,then!
“ The long-term 9%-10% nominal return of the stock market INCLUDES the crashes.” — calvin+hobbs
Mr.Chlorine
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Re: Go for the Honda 0.9% APR loan or pay cash? 35k minivan

Post by Mr.Chlorine »

What I would do, in order:
1. Put 130k towards mortgage, take 0.9% car loan.
2. Pay cash for car, put rest toward mortgage.
3. (way distant third option) Take car loan.

You have the cash that it does not make sense to have multiple loans.
UpperNwGuy
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Re: Go for the Honda 0.9% APR loan or pay cash? 35k minivan

Post by UpperNwGuy »

Buy the new car. You have a family to think about. Ignore those curmudgeons on here who who always say to buy used. I'm sure many of them repair their own cars....
vanpan
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Re: Go for the Honda 0.9% APR loan or pay cash? 35k minivan

Post by vanpan »

I would buy new. I believe the 2020 and 2019 have better transmissions compared to the older models in the lower trim levels. Often a 1 to 2 year old honda costs almost the same as a new one. You may be better off buying a new one, you can haggle with the dealer and when you eventually sell and a 2 year newer model will get you a better price. Also take the .9% financing and just create a monthly autopay for the monthly payment. You an do better than .9% in a savings account. Even if small, this is free money.
fundseeker
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Re: Go for the Honda 0.9% APR loan or pay cash? 35k minivan

Post by fundseeker »

Another vote for a new vehicle for your family!!!
FrugalConservative
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Re: Go for the Honda 0.9% APR loan or pay cash? 35k minivan

Post by FrugalConservative »

If you own your cars for 10+ years. Buy new.
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LilyFleur
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Re: Go for the Honda 0.9% APR loan or pay cash? 35k minivan

Post by LilyFleur »

FrugalConservative wrote: Wed Aug 26, 2020 2:26 pm If you own your cars for 10+ years. Buy new.
Get the leather seats. Kids and their friends spill lots of stuff, and after five years your car won't stink as badly! I loved my Honda minivan, and enjoyed being able to drive around a bunch of kids to their activities. (if you turn the rear speakers up higher than the front speakers, they will talk more loudly and won't realize you can heart everything :mrgreen: )

Unfortunately my transmission went out, but I still got 130,000 miles out of it.
mesaverde
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Re: Go for the Honda 0.9% APR loan or pay cash? 35k minivan

Post by mesaverde »

OP, In 2013 I was in the same situation... I wanted a Honda and had the cash to buy a new one.
I reminded myself that it's always good to have options, so I decided to get a .9% loan from them to buy it.
In hindsight I'm not sure that I would have bought a NEW Honda if they had not offered that loan. There's a good chance I would have bought used instead. Also- less than a year after buying it I paid the loan off in full. Making yet another payment was a hassle and reduced cash flow.

I still have the Honda and plan to keep it for approx. 20 years/300k, whichever comes first. I'll have to admit I've gotten great use out of it. I'm a teacher and practically live of it for 2 months every summer. I've driven across the U.S. to national parks, etc. almost every year and haven't had to worry about it breaking down. Still, if I did it all over again I'd probably buy a used Honda, and will never buy a new car again for the many reasons that are against doing so.
"Learn from the past, live in the present, plan for the future"
momvesting
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Re: Go for the Honda 0.9% APR loan or pay cash? 35k minivan

Post by momvesting »

So what happened?
Topic Author
doss
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Re: Go for the Honda 0.9% APR loan or pay cash? 35k minivan

Post by doss »

momvesting wrote: Wed Aug 26, 2020 10:08 pm So what happened?
The dealer sent me a buyer's order with an agreement for me to put 5k down and then the finance department will get back to me with the rates. Is this THE Honda 0.9%APR loan rate advertised on the Honda sites or is this financing something different than that? I haven't signed it yet.
“ The long-term 9%-10% nominal return of the stock market INCLUDES the crashes.” — calvin+hobbs
Topic Author
doss
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Re: Go for the Honda 0.9% APR loan or pay cash? 35k minivan

Post by doss »

fundseeker wrote: Wed Aug 26, 2020 1:32 pm
Let me suggest that you DO NOT buy their warranty. You can buy a real Honda factory warranty online for probably half what they want, and you can wait for three years before even doing that.

Good luck!!!
Can someone tell me how to find and buy a "real" Honda factory warranty online for half of what they want?
“ The long-term 9%-10% nominal return of the stock market INCLUDES the crashes.” — calvin+hobbs
ccf
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Re: Go for the Honda 0.9% APR loan or pay cash? 35k minivan

Post by ccf »

Times are uncertain! I'd take the loan and if you ever want to pay it off in full, you can.

(I just paid off a Honda 0.9% loan a year early just to get rid of it)
stl717
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Re: Go for the Honda 0.9% APR loan or pay cash? 35k minivan

Post by stl717 »

doss wrote: Thu Aug 27, 2020 8:11 am
fundseeker wrote: Wed Aug 26, 2020 1:32 pm
Let me suggest that you DO NOT buy their warranty. You can buy a real Honda factory warranty online for probably half what they want, and you can wait for three years before even doing that.

Good luck!!!
Can someone tell me how to find and buy a "real" Honda factory warranty online for half of what they want?
Start out by heading over to https://www.odyclub.com/forums/ and do some searching. We sold our Odyssey a couple of years ago, but I vaguely remember there were at least two dealers selling warranties online. https://www.saccuccihondacare.com/ and another one I think up in the Northeast. Ford has the same thing going on, a couple of dealers who sell them online a lot cheaper than you can usually get.
BuddyJet
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Re: Go for the Honda 0.9% APR loan or pay cash? 35k minivan

Post by BuddyJet »

A consideration not mentioned is the effect of the loan on your credit score. It could be a plus or minus depending on your situation.

I’m debt free but take a credit score hit from not having paid an installment loan on time. If you have other debt, a car loan could work against you.
People say nothing is impossible. I do nothing all day.
We're wolves
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Re: Go for the Honda 0.9% APR loan or pay cash? 35k minivan

Post by We're wolves »

You don't say what rate your mortgage is, but if you don't want to go deeper into debt, then pay $35k toward your mortgage (which is likely at a significantly higher rate than 0.9%) and take the loan on the car purchase.
Osterix
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Re: Go for the Honda 0.9% APR loan or pay cash? 35k minivan

Post by Osterix »

doss wrote: Wed Aug 26, 2020 12:08 pm I am looking at purchasing a new 2020 Honda minivan for $35k. I have saved up cash to pay it outright, but Honda is offering 0.9% APR for up to 60 months. Is there a consensus as to whether one should go for the loan or buy the car outright with cash?

I have 130k saved in a savings account (maybe to use for investments, new house, etc) , a 130k mortgage (1041/mo), and 470k in retirement savings at age 40 with 2 kids and 1 SAHM. Currently own two cars, both paid off since 2012 (one of the cars I can only get for $100!). I will take over my wife's 2006 Volvo S60.

I am looking at purchasing today, so would be great to get some feedback as soon as possible. Thank you!
If you keep your vehicles for 10+ years, buy new. We just did that for my spouse’s Santa Fe. Got the all the bells and whistles (I wanted every safety feature for my infant) and prepaid maintenance (spouse wanted to). Anyway, our lowest price was by financing (didn’t end up with the dealer but another bank at 4.99%). Paid it off with available cash a couple weeks later.

I now drive the 8 year old base model Sonata. Previous vehicles were 01 Tundra and 99 Tacoma.

Enjoy!
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susa
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Re: Go for the Honda 0.9% APR loan or pay cash? 35k minivan

Post by susa »

Before you buy or lease and before you finance a car, check out his advice

https://www.youtube.com/c/KevinHunter/videos
davemanjam
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Re: Go for the Honda 0.9% APR loan or pay cash? 35k minivan

Post by davemanjam »

You can get close to 0.9% or better in an online savings account for now.
I'd take the financing deal as it usually comes with some money off purchase.
Either way in 3 months you can pay it off.
petulant
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Re: Go for the Honda 0.9% APR loan or pay cash? 35k minivan

Post by petulant »

Osterix wrote: Thu Aug 27, 2020 9:20 am
doss wrote: Wed Aug 26, 2020 12:08 pm I am looking at purchasing a new 2020 Honda minivan for $35k. I have saved up cash to pay it outright, but Honda is offering 0.9% APR for up to 60 months. Is there a consensus as to whether one should go for the loan or buy the car outright with cash?

I have 130k saved in a savings account (maybe to use for investments, new house, etc) , a 130k mortgage (1041/mo), and 470k in retirement savings at age 40 with 2 kids and 1 SAHM. Currently own two cars, both paid off since 2012 (one of the cars I can only get for $100!). I will take over my wife's 2006 Volvo S60.

I am looking at purchasing today, so would be great to get some feedback as soon as possible. Thank you!
If you keep your vehicles for 10+ years, buy new. We just did that for my spouse’s Santa Fe. Got the all the bells and whistles (I wanted every safety feature for my infant) and prepaid maintenance (spouse wanted to). Anyway, our lowest price was by financing (didn’t end up with the dealer but another bank at 4.99%). Paid it off with available cash a couple weeks later.

I now drive the 8 year old base model Sonata. Previous vehicles were 01 Tundra and 99 Tacoma.

Enjoy!
I want to follow this logic, but what about the opportunity cost on having more money sank into the vehicle, plus the higher insurance expense? I wouldn't want to drive around a $25K vehicle without comp/collision...
hamhocs
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Re: Go for the Honda 0.9% APR loan or pay cash? 35k minivan

Post by hamhocs »

stl717 wrote: Thu Aug 27, 2020 9:06 am
doss wrote: Thu Aug 27, 2020 8:11 am
fundseeker wrote: Wed Aug 26, 2020 1:32 pm
Let me suggest that you DO NOT buy their warranty. You can buy a real Honda factory warranty online for probably half what they want, and you can wait for three years before even doing that.

Good luck!!!
Can someone tell me how to find and buy a "real" Honda factory warranty online for half of what they want?
Start out by heading over to https://www.odyclub.com/forums/ and do some searching. We sold our Odyssey a couple of years ago, but I vaguely remember there were at least two dealers selling warranties online. https://www.saccuccihondacare.com/ and another one I think up in the Northeast. Ford has the same thing going on, a couple of dealers who sell them online a lot cheaper than you can usually get.
Yes the other one is Hyannis Honda. I got a warranty that the dealer wanted $1800 for $600. I don't even buy warranties but for this amount? Heck yeah.
nolesrule
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Re: Go for the Honda 0.9% APR loan or pay cash? 35k minivan

Post by nolesrule »

petulant wrote: Fri Aug 28, 2020 6:33 am
Osterix wrote: Thu Aug 27, 2020 9:20 am
doss wrote: Wed Aug 26, 2020 12:08 pm I am looking at purchasing a new 2020 Honda minivan for $35k. I have saved up cash to pay it outright, but Honda is offering 0.9% APR for up to 60 months. Is there a consensus as to whether one should go for the loan or buy the car outright with cash?

I have 130k saved in a savings account (maybe to use for investments, new house, etc) , a 130k mortgage (1041/mo), and 470k in retirement savings at age 40 with 2 kids and 1 SAHM. Currently own two cars, both paid off since 2012 (one of the cars I can only get for $100!). I will take over my wife's 2006 Volvo S60.

I am looking at purchasing today, so would be great to get some feedback as soon as possible. Thank you!
If you keep your vehicles for 10+ years, buy new. We just did that for my spouse’s Santa Fe. Got the all the bells and whistles (I wanted every safety feature for my infant) and prepaid maintenance (spouse wanted to). Anyway, our lowest price was by financing (didn’t end up with the dealer but another bank at 4.99%). Paid it off with available cash a couple weeks later.

I now drive the 8 year old base model Sonata. Previous vehicles were 01 Tundra and 99 Tacoma.

Enjoy!
I want to follow this logic, but what about the opportunity cost on having more money sank into the vehicle, plus the higher insurance expense? I wouldn't want to drive around a $25K vehicle without comp/collision...
Not the OP, but not everything is about opportunity cost. We buy new and hold onto them longer. You are always taking a gamble with a used car, because you don't know its history. I also don't think the cost of insurance is necessarily as much of an opportunity cost as people make it out to be. Where you live is more of an opportunity cost when it comes to insurance than the vehicle.
petulant
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Re: Go for the Honda 0.9% APR loan or pay cash? 35k minivan

Post by petulant »

nolesrule wrote: Fri Aug 28, 2020 7:13 am
petulant wrote: Fri Aug 28, 2020 6:33 am
Osterix wrote: Thu Aug 27, 2020 9:20 am
doss wrote: Wed Aug 26, 2020 12:08 pm I am looking at purchasing a new 2020 Honda minivan for $35k. I have saved up cash to pay it outright, but Honda is offering 0.9% APR for up to 60 months. Is there a consensus as to whether one should go for the loan or buy the car outright with cash?

I have 130k saved in a savings account (maybe to use for investments, new house, etc) , a 130k mortgage (1041/mo), and 470k in retirement savings at age 40 with 2 kids and 1 SAHM. Currently own two cars, both paid off since 2012 (one of the cars I can only get for $100!). I will take over my wife's 2006 Volvo S60.

I am looking at purchasing today, so would be great to get some feedback as soon as possible. Thank you!
If you keep your vehicles for 10+ years, buy new. We just did that for my spouse’s Santa Fe. Got the all the bells and whistles (I wanted every safety feature for my infant) and prepaid maintenance (spouse wanted to). Anyway, our lowest price was by financing (didn’t end up with the dealer but another bank at 4.99%). Paid it off with available cash a couple weeks later.

I now drive the 8 year old base model Sonata. Previous vehicles were 01 Tundra and 99 Tacoma.

Enjoy!
I want to follow this logic, but what about the opportunity cost on having more money sank into the vehicle, plus the higher insurance expense? I wouldn't want to drive around a $25K vehicle without comp/collision...
Not the OP, but not everything is about opportunity cost. We buy new and hold onto them longer. You are always taking a gamble with a used car, because you don't know its history. I also don't think the cost of insurance is necessarily as much of an opportunity cost as people make it out to be. Where you live is more of an opportunity cost when it comes to insurance than the vehicle.
Yeah, next time we go shopping I think I'll try to get insurance quotes on new vs. used...I am way more interested in buying new and holding for 10 or so years, but not if there's a big extra insurance cost to it.
nolesrule
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Re: Go for the Honda 0.9% APR loan or pay cash? 35k minivan

Post by nolesrule »

petulant wrote: Fri Aug 28, 2020 7:24 am
nolesrule wrote: Fri Aug 28, 2020 7:13 am
petulant wrote: Fri Aug 28, 2020 6:33 am
Osterix wrote: Thu Aug 27, 2020 9:20 am
doss wrote: Wed Aug 26, 2020 12:08 pm I am looking at purchasing a new 2020 Honda minivan for $35k. I have saved up cash to pay it outright, but Honda is offering 0.9% APR for up to 60 months. Is there a consensus as to whether one should go for the loan or buy the car outright with cash?

I have 130k saved in a savings account (maybe to use for investments, new house, etc) , a 130k mortgage (1041/mo), and 470k in retirement savings at age 40 with 2 kids and 1 SAHM. Currently own two cars, both paid off since 2012 (one of the cars I can only get for $100!). I will take over my wife's 2006 Volvo S60.

I am looking at purchasing today, so would be great to get some feedback as soon as possible. Thank you!
If you keep your vehicles for 10+ years, buy new. We just did that for my spouse’s Santa Fe. Got the all the bells and whistles (I wanted every safety feature for my infant) and prepaid maintenance (spouse wanted to). Anyway, our lowest price was by financing (didn’t end up with the dealer but another bank at 4.99%). Paid it off with available cash a couple weeks later.

I now drive the 8 year old base model Sonata. Previous vehicles were 01 Tundra and 99 Tacoma.

Enjoy!
I want to follow this logic, but what about the opportunity cost on having more money sank into the vehicle, plus the higher insurance expense? I wouldn't want to drive around a $25K vehicle without comp/collision...
Not the OP, but not everything is about opportunity cost. We buy new and hold onto them longer. You are always taking a gamble with a used car, because you don't know its history. I also don't think the cost of insurance is necessarily as much of an opportunity cost as people make it out to be. Where you live is more of an opportunity cost when it comes to insurance than the vehicle.
Yeah, next time we go shopping I think I'll try to get insurance quotes on new vs. used...I am way more interested in buying new and holding for 10 or so years, but not if there's a big extra insurance cost to it.
Last time I bought a car I was in New Jersey, so I pulled up my policies. Difference between comp and collision on my 2001 Honda Civic vs. 2016 Honda HR-V was $273 a year.

We're now in NC, and the difference in comp and collision between my wife's 2006 CR-V and my 2016 HR-V is $76/year. I'm also only paying $76/year more in NC for 2 cars than I was paying in NJ for just my Honda Civic when it was 15 years old. NC is a much cheaper state as our auto insurance is about half what it was in NJ.... only a minimal amount of that is due to age of the cars as we only moved a year ago.

I do think if you are constantly rotating cars that buying used will save you a lot more money, but if you are a buy and hold car owner, buying new can make sense. I mean, when I was 17 I destroyed the transmission on my dad's car, but you couldn't tell from the mileage. I was a teenager who liked to accelerate out of traffic lights to the point where second gear lost all its teeth due to excessive wear and tear. A transmission is one of those invisible problems because of the cost involved in taking it apart just to look at the inside.
Osterix
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Re: Go for the Honda 0.9% APR loan or pay cash? 35k minivan

Post by Osterix »

petulant wrote: Fri Aug 28, 2020 6:33 am
Osterix wrote: Thu Aug 27, 2020 9:20 am
doss wrote: Wed Aug 26, 2020 12:08 pm I am looking at purchasing a new 2020 Honda minivan for $35k. I have saved up cash to pay it outright, but Honda is offering 0.9% APR for up to 60 months. Is there a consensus as to whether one should go for the loan or buy the car outright with cash?

I have 130k saved in a savings account (maybe to use for investments, new house, etc) , a 130k mortgage (1041/mo), and 470k in retirement savings at age 40 with 2 kids and 1 SAHM. Currently own two cars, both paid off since 2012 (one of the cars I can only get for $100!). I will take over my wife's 2006 Volvo S60.

I am looking at purchasing today, so would be great to get some feedback as soon as possible. Thank you!
If you keep your vehicles for 10+ years, buy new. We just did that for my spouse’s Santa Fe. Got the all the bells and whistles (I wanted every safety feature for my infant) and prepaid maintenance (spouse wanted to). Anyway, our lowest price was by financing (didn’t end up with the dealer but another bank at 4.99%). Paid it off with available cash a couple weeks later.

I now drive the 8 year old base model Sonata. Previous vehicles were 01 Tundra and 99 Tacoma.

Enjoy!
I want to follow this logic, but what about the opportunity cost on having more money sank into the vehicle, plus the higher insurance expense? I wouldn't want to drive around a $25K vehicle without comp/collision...
Understandable. We could have bought a 2-3 year old used car, drive for 10+ years, likely lower insurance payments and come out ahead financially. I don’t think of every decision as making the most efficient choice. In my mind, money can be put into three buckets: Giving, Saving, Spending. As long as we reach our goals with Giving and Saving, we buy what we want when we need it as long as we can pay it off immediately. I have an umbrella policy requiring higher levels of comp/collision too.
bogledogle
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Re: Go for the Honda 0.9% APR loan or pay cash? 35k minivan

Post by bogledogle »

doss wrote: Wed Aug 26, 2020 12:08 pm I am looking at purchasing a new 2020 Honda minivan for $35k. I have saved up cash to pay it outright, but Honda is offering 0.9% APR for up to 60 months. Is there a consensus as to whether one should go for the loan or buy the car outright with cash?

I have 130k saved in a savings account (maybe to use for investments, new house, etc) , a 130k mortgage (1041/mo), and 470k in retirement savings at age 40 with 2 kids and 1 SAHM. Currently own two cars, both paid off since 2012 (one of the cars I can only get for $100!). I will take over my wife's 2006 Volvo S60.

I am looking at purchasing today, so would be great to get some feedback as soon as possible. Thank you!
If I get 0.9 interest rate with the best price around, I would go for it and invest the money as long as the loan payment do not impact my lifestyle. If you negotiate a good price, that would pay for the interest itself.
tibbitts
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Re: Go for the Honda 0.9% APR loan or pay cash? 35k minivan

Post by tibbitts »

flyphotoguy wrote: Wed Aug 26, 2020 12:48 pm I would buy used (durable & reliable brands like toyota/honda) and pay cash...
Everybody else thinks Toyota and Honda are durable and reliable too, and they're priced that way in the used market. On the other hand, you might find a better deal in a lightly used Grand Caravan.
tibbitts
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Re: Go for the Honda 0.9% APR loan or pay cash? 35k minivan

Post by tibbitts »

Osterix wrote: Fri Aug 28, 2020 11:46 am I have an umbrella policy requiring higher levels of comp/collision too.
I wasn't even aware that an umbrella required any comp or collision at all.
Osterix
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Re: Go for the Honda 0.9% APR loan or pay cash? 35k minivan

Post by Osterix »

tibbitts wrote: Fri Aug 28, 2020 1:04 pm
Osterix wrote: Fri Aug 28, 2020 11:46 am I have an umbrella policy requiring higher levels of comp/collision too.
I wasn't even aware that an umbrella required any comp or collision at all.
Hm, maybe I misspoke! I know I had to increase a portion of my auto coverage when I got the umbrella. It was the bodily injury I believe. I am probably wrong that comprehensive and collision coverage is required.
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CyclingDuo
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Re: Go for the Honda 0.9% APR loan or pay cash? 35k minivan

Post by CyclingDuo »

doss wrote: Wed Aug 26, 2020 12:08 pm I am looking at purchasing a new 2020 Honda minivan for $35k. I have saved up cash to pay it outright, but Honda is offering 0.9% APR for up to 60 months. Is there a consensus as to whether one should go for the loan or buy the car outright with cash?

I have 130k saved in a savings account (maybe to use for investments, new house, etc) , a 130k mortgage (1041/mo), and 470k in retirement savings at age 40 with 2 kids and 1 SAHM. Currently own two cars, both paid off since 2012 (one of the cars I can only get for $100!). I will take over my wife's 2006 Volvo S60.

I am looking at purchasing today, so would be great to get some feedback as soon as possible. Thank you!
It's a car - depreciating asset. Pay cash and be done with it. Start saving for the next one so you can do the same 10-12 years or whenever from now.

CyclingDuo (We have always paid cash for cars...)
"Save like a pessimist, invest like an optimist." - Morgan Housel
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Toons
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Re: Go for the Honda 0.9% APR loan or pay cash? 35k minivan

Post by Toons »

Pay Cash
Put it out of your mind and
Behind you.
Move forward
:mrgreen:
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee
dandinsac
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Re: Go for the Honda 0.9% APR loan or pay cash? 35k minivan

Post by dandinsac »

Listen to this podcast for more tips and entertainment.. https://www.thisamericanlife.org/513/129-cars
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3CheersforLkyJack
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Re: Go for the Honda 0.9% APR loan or pay cash? 35k minivan

Post by 3CheersforLkyJack »

tibbitts wrote: Fri Aug 28, 2020 1:02 pm
flyphotoguy wrote: Wed Aug 26, 2020 12:48 pm I would buy used (durable & reliable brands like toyota/honda) and pay cash...
Everybody else thinks Toyota and Honda are durable and reliable too, and they're priced that way in the used market. On the other hand, you might find a better deal in a lightly used Grand Caravan.
This is exactly what we did. A used Town and Country, one year old, 38k miles, leather seats, rear TV, $19k. For a new Honda we would have paid over $30k for those features. I can pay for a ton of repairs with the $10-$15k we saved if necessary. Did not even consider a used Honda or Toyota minivan as the used prices did not make sense compared to a new one.
Scooter17
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Re: Go for the Honda 0.9% APR loan or pay cash? 35k minivan

Post by Scooter17 »

UpperNwGuy wrote: Wed Aug 26, 2020 1:51 pm Buy the new car. You have a family to think about. Ignore those curmudgeons on here who who always say to buy used. I'm sure many of them repair their own cars....
Agree
MiddleOfTheRoad
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Re: Go for the Honda 0.9% APR loan or pay cash? 35k minivan

Post by MiddleOfTheRoad »

doss wrote: Thu Aug 27, 2020 7:47 am
momvesting wrote: Wed Aug 26, 2020 10:08 pm So what happened?
The dealer sent me a buyer's order with an agreement for me to put 5k down and then the finance department will get back to me with the rates. Is this THE Honda 0.9%APR loan rate advertised on the Honda sites or is this financing something different than that? I haven't signed it yet.
Red flag! It sounds like they are steering you to a third party lender. Ask specifically about the 0.9% loan from the manufacturer (Honda financials).
Good luck
TropikThunder
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Re: Go for the Honda 0.9% APR loan or pay cash? 35k minivan

Post by TropikThunder »

Tingting1013 wrote: Wed Aug 26, 2020 1:32 pm Are there any loan origination fees?

Is there a prepayment penalty?
On a car?!
Dandy
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Re: Go for the Honda 0.9% APR loan or pay cash? 35k minivan

Post by Dandy »

A long time ago I was helping my daughter buy a Honda Civic. After getting a fair price they mentioned a .9% loan. Interest rates were much higher then. I agreed. I went to the guy who handles the financing and he handed me a spread sheet with various loan payments and asked me to select the one I wanted.

Luckily I said "I want the one with .9%. It wasn't listed on his hand out!! He took his handout back and I got the loan rate. I was so mad at this attempted trickery I wanted to tear up the contract.

So, don't every let down your guard.
fundseeker
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Re: Go for the Honda 0.9% APR loan or pay cash? 35k minivan

Post by fundseeker »

doss wrote: Thu Aug 27, 2020 8:11 am
fundseeker wrote: Wed Aug 26, 2020 1:32 pm
Let me suggest that you DO NOT buy their warranty. You can buy a real Honda factory warranty online for probably half what they want, and you can wait for three years before even doing that.

Good luck!!!
Can someone tell me how to find and buy a "real" Honda factory warranty online for half of what they want?
https://hyannishondacare.com/
smalliebigs
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Re: Go for the Honda 0.9% APR loan or pay cash? 35k minivan

Post by smalliebigs »

I really hate it when people post car buying questions, and the flood of responses is to try and convince them not to buy new or lease. Everyone should have some respect for the OP that there must be a reason why he/she wanted to buy or lease new. Some people just don't want a used vehicle, despite how great 'value for money' it is. Not everything in life is about money.

Regarding the question, I'd do the 0.9 APR. That's pretty much free cash.
MarkBarb
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Re: Go for the Honda 0.9% APR loan or pay cash? 35k minivan

Post by MarkBarb »

When I was in your shoes, the price with financing was $500 less than if I paid cash. I made a gentlemen's agreement with the dealer that I would finance it and wait 90 days to pay off the loan so that they would get credit and their $500's from Honda finance. In pure dollar terms, it probably would have made sense to keep the money invested and continue to pay the loan, but the difference wasn't worth the hassle of accounting for the loan payments each month.
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whodidntante
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Re: Go for the Honda 0.9% APR loan or pay cash? 35k minivan

Post by whodidntante »

ccf wrote: Thu Aug 27, 2020 8:44 am Times are uncertain! I'd take the loan and if you ever want to pay it off in full, you can.

(I just paid off a Honda 0.9% loan a year early just to get rid of it)
Agreed. I don't quite understand why some people equate less debt with security. You get lower debt by sinking your money into illiquid assets.
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