Paying cars cash vs financing

[Capt Caveman]

Depends on the interest rate. My last new car I got something like 1.9% financing and just traded it for a 2015 used vehicle which I paid cash for.

 

[skyking]

first, 100% reliable is not attainable. Sure, you get people telling you all these stories about no problems for a bazillion miles, but look at the main streets of USA. Car shops all over, dealerships, etc.
Don't try to chase 100% anything. Get AAA and save up for repairs, and have a nice party when they don't happen
12K will get you a good car with few miles, maybe 10% used up and 35% depreciated.
We pay cash for cars and have for a very long time now.

 

[OverVolt]

Buy cheap cars because people are over extending with cheap credit. Thus the price is bid up. So ride it out with a new, cheap car.

I actually prefer steel wheels for example over alloy wheels and lower profile tires.

Audi has a sports suspension upgrade that lowers your car which is like the exact opposite of what you want with so many potholes in the roads.

In general people are just being dumb with cars. They are so loaded with options... go mid-model or base model.

If you get 0.9% financing you are often getting that in lieu of a rebate. I feel its better to actually pay the car off ASAP. Opt for the rebate, put some money down and the sucker will be paid off in no time. Why carry large principles even at low interest. Thats a losing proposition because the car will likely need repairs near the end of the loan.

I wouldn't drive anything that costs more than $30k. I got my '15 Sentra SV for $16.7k. I figure with the owners manual being put in 5w30 every 5,000 miles until 120,000 miles then repeat its one of the cheapest cars to operate and at 3,000lbs with LED brake lights and a high road presence from behind relatively safe too. It has good ride height for all the potholes and such. I feel like 5-10 years from now there will be alot of survivor-ship bias with the car.

 

[OverVolt]

The interest on our last car loan was like $350 over 3 years... not that big of a deal.

Yea except they probably ate a rebate to apply the 0.9%

So it really costs $1850-$3000 + $350

 

[highland145]

Well, maths work.

 

[brianmanahan]

paid cash for all my cars/trucks, both used and new. all but 1 of them were real cheap.

if i could get financing for %1 or less i'd probably take it though

 

[highland145]

Ain't nobody financing you, Bri.

Just sayin.


::biggrin:

 

[SearchMaster]

The interest on our last car loan was like $350 over 3 years... not that big of a deal.

Dave Ramsey advocates zero debt period - it's not the amount of interest paid, it's the freedom provided by being debt-free. This philosophy works for some people...maybe it's not the most mathematically strategic way to approach life but it's not "wrong" either. He makes an exception for a home purchase because you generally don't go upside-down on the loan, but only with a sufficient down payment and a mortgage that's properly proportioned to your income.

Usually my wife would get the new cars and I get the used ones and that was fine. Three and a half years ago I got a new car, my first since 1990. I hold my cars for a long time so I'll likely drive it for 8 or 9 more years. My wife drives hers a long time also.

 

[Herr Kutz]

What's your thoughts on it? Do you buy used cars cash? New cars financed? New cars cash? Currently I finance new cars. Can't help but feel it's a huge waste of money. Listening to Dave Ramsey he absolutely hates financing vehicles. I don't really see myself having more than 12k to buy a cash car when the time comes. I'm not sure I trust a 12k car to be 100% reliable. What is your opinions and experiences?

Bought a 3 year old used cat with 49k miles for $10.5k. It is now 8 years old, I'm nearly up to 182k miles, and the only things that have gone wrong are the complicated CD changer doesn't work and a door handle came off (easy fix).

 

[brianmanahan]

Ain't nobody financing you, Bri.

Just sayin.

::biggrin:

oh, i forgot - i got a 40 year loan on my M3

 

[highland145]

So you got Alky's sig? Excellent.

Mind if I borrow that? The birth cert will do just fine.

Thanks.



I bet he's kicking some storm ass right about now. Hulking that wimp Matthew.

 

[Red Squirrel]

Cars depreciate too fast, I can't justify paying full price for a new car knowing that it will be worth less than what I owe on it the minute I drive it off the lot. I always buy used and pay cash. Especially considering a used one is going to serve the same purpose. I'm on car #2 now, and paid about 5k for it. I put maybe 3k into it give or take throughout the time I've had it. It's still cheaper than buying new and having constant payments.

 

[ponyo]

,,

 

[Kaido]

first, 100% reliable is not attainable. Sure, you get people telling you all these stories about no problems for a bazillion miles, but look at the main streets of USA. Car shops all over, dealerships, etc.
Don't try to chase 100% anything. Get AAA and save up for repairs, and have a nice party when they don't happen
12K will get you a good car with few miles, maybe 10% used up and 35% depreciated.
We pay cash for cars and have for a very long time now.

I bought a new car last year (Jeep Renegade). Has been a total lemon for me. Prior to that, I had 10+ years of leasing with no headaches. Can't win 'em all!

 

[Kaido]

What's your thoughts on it? Do you buy used cars cash? New cars financed? New cars cash? Currently I finance new cars. Can't help but feel it's a huge waste of money. Listening to Dave Ramsey he absolutely hates financing vehicles. I don't really see myself having more than 12k to buy a cash car when the time comes. I'm not sure I trust a 12k car to be 100% reliable. What is your opinions and experiences?

It depends on a lot of things - mostly, what your available budget is. Also, how you want to approach it...you can lease, buy new, buy a late-model used, or buy regular used. I leased my last four cars (36-month leases) & had a good experience each time. Most people don't like having monthly payments, but I liked having a fixed amount for my monthly budget rather than random expensive fixes. $400 for tires here, $300 for brakes there, etc. For leasing, you also have to live within the mileage limit (plus take good care of the car), but pretty much you just cover gas & oil changes, plus insurance, nothing major to fix within the first 3 years typically. Irony is, I just bought a new car last year (instead of leasing again) & it turned out to be a lemon, go figure!

Also, keep the right perspective in mind. Dave Ramsey makes a living people teaching people who struggle with finances how to get out of debt & stay out of debt. The best option for owning a car in that situation is to get a reliable used car that isn't going to cost you a ton in maintenance. That is pretty much the most frugal way to own a car, short of learning car maintenance & doing your own repairs at home. If that is your situation, it is good advice to follow. But that's not the only route; all it pretty much boils down to is what you want & what you can afford. You can buy a nice brand-new stick-shift Nissan Versa sedan for $12k new:

http://www.conicellinissan.com/new/Nissan/2017-Nissan-Versa-4612e52d0a0e0a174fa14610f10e01a6.htm

Used cars are worth researching, especially off-lease vehicles. Let someone else eat the depreciation & get the car at a nice discount. Older used cars can be fun too. A few years ago I needed an interim car & bought an early-2000 Volvo. The owner had kept meticulous records, which averaged out to $3k a year in maintenance & went as high as $6k one year. I bought it for $4k; after a year or so, it needed a replacement transmission & the cheapest used tranny I could find was $4,800. Not the most cost-effective vehicle. Traded it in before it sucked any more money out of me.

Another perspective: let's say you're 30 & live to 100 years old. That's 70 years of driving ahead of you. Do you want to drive new cars or used cars? Do you want to get the cheapest car possible so that you can put more money into other things like travel & gaming computers? Do you want to drive a cool car, an economical car, a big truck? If you're strapped for cash, you're going to need to get the cheapest reliable car you can afford. If you have more of a budget, you have more options. All depends on how you want to look at it. $12k can cover a nice lease; for example, you can get a Cadillac ATS for $3.5k down & $280 a month:

http://usnews.rankingsandreviews.com/cars-trucks/Cadillac_ATS/2016/prices/

Or you can buy a 2016 Versa in cash. Or get a pretty nice used car. Lots of options. All depends on how you'd like to approach it.

 

[Mai72]

I would lease.

I have a buddy whose currently leasing and is involved in network marketing. Get this. He gets to write off the full amount of his car because he has a side business. He doesn't have to show profit. All he does is document that he's working his side business everyday. He gets to write off part of his rent, a new computer, printer, etc... Anything that's related to his network marketing gig he gets to write off. All without making a dime. You just gotta play the game which most people do not do. I don't care for Trump but I have to admit he's smart for not paying his taxes.

 

[Red Squirrel]

I would lease.

I have a buddy whose currently leasing and is involved in network marketing. Get this. He gets to write off the full amount of his car because he has a side business. He doesn't have to show profit. All he does is document that he's working his side business everyday. He gets to write off part of his rent, a new computer, printer, etc... Anything that's related to his network marketing gig he gets to write off. All without making a dime. You just gotta play the game which most people do not do. I don't care for Trump but I have to admit he's smart for not paying his taxes.

Yeah in some cases leasing actually makes sense and this is one of them. Though IMO I find it also shows how ridiculous the tax system is. SOMEBODY is still paying for that car... probably the tax payers.

 

[repoman0]

I would lease.

I have a buddy whose currently leasing and is involved in network marketing. Get this. He gets to write off the full amount of his car because he has a side business. He doesn't have to show profit. All he does is document that he's working his side business everyday. He gets to write off part of his rent, a new computer, printer, etc... Anything that's related to his network marketing gig he gets to write off. All without making a dime. You just gotta play the game which most people do not do. I don't care for Trump but I have to admit he's smart for not paying his taxes.

Or are his accountants smart and he's a dumbass for losing close to $1B in a year?

 

[Humpy]

I would lease.

I have a buddy whose currently leasing and is involved in network marketing. Get this. He gets to write off the full amount of his car because he has a side business. He doesn't have to show profit. All he does is document that he's working his side business everyday. He gets to write off part of his rent, a new computer, printer, etc... Anything that's related to his network marketing gig he gets to write off. All without making a dime. You just gotta play the game which most people do not do. I don't care for Trump but I have to admit he's smart for not paying his taxes.

If you're interested in understanding how your buddy might be screwing himself you might look into the "9 factors of profit motive" that the IRS uses when people try to play the game.

 

[Rumpltzer]

I bought a beater pickup truck when I was an undergrad. Paid cash for that, and drove it until it was 17 years old with >170K miles.

Financed a new Honda Accord for <2% when I left school, paid it off early, and I drove that for 11 years (~140K miles).

Financed a Lexus for <2%, and I'm making additional payments on that every month.

I have trust issues, and I do my own maintenance work; oil, brakes, swapping out starters and alternators, etc. I take care of my stuff. I can afford the payments on the cars that I finance. I see nothing wrong with it.

 

[brianmanahan]

side question: how much should someone allow themselves to pay for a vehicle? what % of net worth (or annual income)?

 

[highland145]

25% of net, max. Same for housing. Just my opinion though.

 

[purbeast0]

Yea except they probably ate a rebate to apply the 0.9%

So it really costs $1850-$3000 + $350

Where did you just pull these numbers from? (1850 and 3000)

 

[AznAnarchy99]

I lease, which has been great, but it's kicking my ass right now trying to get a home loan.

 

[SearchMaster]

Or are his accountants smart and he's a dumbass for losing close to $1B in a year?

My BIL did some construction work for a billionaire back during the stock market crash. The guy lost over $900M (on paper) - in a day. My BIL said he didn't seem fazed by it.