Should You Finance or Buy a Car with Cash?

Рет қаралды 5,418

Ай бұрын

Should You Finance or Buy a Car with Cash?
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Пікірлер: 34

@briankelly1240 Ай бұрын

Pretty sure he was asking about if liquidating his investments is worth avoiding taking a loan.

@PerdomoZ4M Ай бұрын

I financed a tesla a few days ago. Took advantage of the .99% interest. Did 14k down and got the 7500 tax incentive upfront. Ill ride out my 60/mo loan because the payment is affordable to me. I can pay it cash but id rather keep my money in the market.

@ryebread447 Ай бұрын

Nice. Would u have had leftover money if you did pay it with ur cash? I feel that if u have 6 months emergency fund u can do what u want. If inesting for gains or paying off for peace is your thing, do it! Your stable

@PerdomoZ4M Ай бұрын

@@ryebread447 i would still have a fully funded emergency fund yes. This is just savings ive accumalted over my career that sits in a HYSA. I'm 30 so been working for 12 years now. While I agree most debt is bad and you should pay off debt immediately, i think you can leverage debt if you are responsible enough, but very few are. I personally do not mind carrying a car loan. Bills and general expenses are account for, still maxing out my roth and and taking full advantage of my max employer 401k contributions and setting a little aside into my hysa. I don't see the point in paying off .9% when i can have a hysa pay me 4.5% on my money.

@l4xx03luyf6l0to Ай бұрын

You can usually get a better price if you finance through the dealer because they earn a commission from it. I finance. After the paperwork is signed I ask them how long I have to keep the loan for them to get the commission. The answer is usually three months. After that I pay it off if my investments are not doing as good or better.

@StandOwtPhoto Ай бұрын

But you’re giving it back in interest…

@l4xx03luyf6l0to Ай бұрын

@@StandOwtPhoto Mostly but I like having it as an extra emergency fund.

@StandOwtPhoto Ай бұрын

@@l4xx03luyf6l0to so basically you are saying that you would rather pay int, on borrowed money, to use money saved up, that isnt gaining int. to use money that you are paying intr. on, that was borrowed on a depreciating asset? got it.

@jacobgray9742 Ай бұрын

I’m proud to say I’ve never had a car payment. I’ve always driven hoopties. And probably will forever. (I’m 30 -and brand new to the show) I absolutely love the content. Thanks for all the great information yall. I wish more people my age and younger listened to this stuff. I’m in step 5. But as I don’t have employer 401k do I go straight to 7? I aspire not to be rich. But comfortable, and to have the capacity to show my sons the world. And that we don’t have to be another statistic writhin our financial system. Thanks and have a great day!

@ryebread447 Ай бұрын

Care to expound? Ur goal is to travel and not be a statistic? I like the idea of having ur own vision for your "rich" life instead of some number btw

@jacobgray9742 Ай бұрын

Statistic as in not doing it (traveling) with debt. :)

@helomech1973 Ай бұрын

All our cars are paid off and we put 800 a month into a account strictly for buying a new car.

@MichaelSmith-fj7di Ай бұрын

In certain circumstances, it can make sense to finance. For instance, if the only option that you can afford in cash is a $1,000 clunker, I’d finance. I’d also finance in cases where you can get a zero percent interest loan.

@thehomeless_trucker 29 күн бұрын

The first reason is the literal reason for 20/3/8...

@MC-gj8fg Ай бұрын

If there's a rate special lower than you can make in the money market, then finance. If there is downpayment assistance money from the manufacturer but no rate special, then finance and pay in full at the time of the first payment. If there is neither a rate special nor downpayment assistance, then pay cash.

@alpagad Ай бұрын

If you get a low interest rate loan (< 3%) to buy a car, wouldn’t it make sense to invest the cash you have on hand (let’s say 50K) and take the loan to buy the car?

@ryebread447 Ай бұрын

10k left on a 2.25% interst loan. Have emergency fund and enough yo pay it off. Ibonds and HYSA provide a better return. Could i do even better by paying off and throwing that monthly money into the market?

@emoney1231 Ай бұрын

Kind of a strange situation. If, for example, you knew you were buying a car in one year, and the market is up 80% of the time over 1 year, it's generally better to invest and sell in one year vs. saving up cash. But once you've built the investment, you shouldn't sell? Rearward looking, how is that different than building up cash over the last year? My only thought is selling assets could be 1) considered market timing or 2) lead you to spend more or buy more impulsively vs. saving up cash for it.

@wiskin88 Ай бұрын

Does this same rule apply when financing is offered at something like 0% or 0.99%?

@EarlsPearls Ай бұрын

I slightly disagree. If all your assets are currently getting higher returns than the interest you will pay finance. I decided on a 48m loan for my wife's car. We have the cash to pay it off today but the loans 3.49% and even my lowest savings is 5%. Why would I waste money?

@stocksxbondage Ай бұрын

I agree. It’s case by case, but I’ve paid down low interest debt to lower my monthly expenses, but in retrospect, I regret missing out on the returns had I just invested instead. Depends on how lean your monthly expenses are compared to income, size of emergency fund, and job security. At the end of the day, the fear is “what if I lose my income and can’t make the payment?” If you can elevate that fear with a logical failsafe, financing at a low interest rate is the way to go mathematically.

@tcgtpl Ай бұрын

Bo kind of touches on this @3:00. Financing at a low interest rate is better than paying cash because you’re losing the gains from the time saving up enough money to buy a car in cash.

@Near54321 Ай бұрын

That 5% is cut in half when you account for taxes. Essentially break even

@EarlsPearls Ай бұрын

@@Near54321 No, you don't know basic economics. You pay your income tax rate on 1099int capital gains. We have a progressive tax system in the US. I personally on the high end pay 25% so I lose 1/4 of it but people in lower brackets can lose less and even the highest bracket is t 50%.

@theodt Ай бұрын

⁠thanks for sharing a bit about your personal situation and the rationale behind financing your car. The math based on this 25% tax rate leads to a net 3.75% interest on your savings account, assuming bank interest doesn't change throughout the next 4 years of your car loan. This produces a difference of 3.75%-3.49% = 0.26% pa over the course of the loan. Is this increased risk of incurring debt for your car worth it for a 0.26% return? How much of a car loan is it and how much in dollars is at stake to arbitrage here?