Pay cash or finance a new vechile?

So if a person has a healthy investment savings and can draw out of it without penalty..........is it wiser to pay cash for a new vechile or leave the money in investment and finance at 2.87%? Asking for a friend.

Now is a good time to borrow money. The rates are below inflation.

Thank you.

depends on "Healthy" and if there's a charge tacked on to the financing also will you add to your insurance policy to cover the loan or put up collateral found this out from a friend

Pay cash.

My understanding is that paying cash that amounts to over 10 g opens up IRS quandaries...am I wrong about this?
Heard this from a buddy that saved his money and wanted to guy a vehicle with cash...dealer told him to pay 9 g as anything over created issues.

close mike.......9,999 but same idea....9000 is safer......last i knew cashiers check was ok but its been awhile since i did that.

I know the IRS wants as much money as they can steal. % years ago I purchased a new pickup. I placed $20,000 down and financed the rest for a short time.

I will be getting another new truck this August sometime. Again I will place a large amount down. IRS can find nothing, unless they create something.

X2

Who cares, if you obtained the money legally, let them waste their time 'investigating' if they have nothing better to do....

Buy used.

Put down a big chunk of cash on a low rate loan the make payments on the rest to move your credit score up is what I did with my Tacoma, pay it off down the road and your credit score only gets better then.

Some plans there is a replacement clause in them if the vechicle is written off until it is paid in full.
Read the fine print in the agreements before signing.
Miss one payment and " midnight towing" may make your life a mess.

never-never leave the dealers sticker on the purchased vechicle...it is a Caveat. And they have the right to compound for 2 cents owing'''''''
first thing I learned in a Law Course

I usually say cash.
With the rates today id say finance it and pay it off on the first payment. Some dealers won't accept "cash" payment for the purchase.

You're over thinking this. Cash just means no loan. You can write a check, money transfer, etc. No one is saying show up with a bag of paper currency.

Deposits of 10k + are reported to the IRS from the bank. If you're flying with over 10k it must be declared.

Make it a math problem. For the 5 years they want to finance you, how much would that charge be vs how much would you loose taking money out of the investment (plus whatever early withdrawal penalties you would be subject to).

cash is king

Dealer makes more $$ on the financing side than selling cars.

For what used trucks are bringing buying used makes little sense.

A 2019 with 11000 miles is selling for 30k
A 2021 with 2000 miles is selling for 34k

This

Very true on the financing. NEVER tell the salesman know you want to pay cash. Big mistake. Always play along that you are going to finance. Wait until the very last minute to spring the cash and want to go that route instead of financing. Wait until you have a set price carved into stone before mentioning cash. If you let them know you want to pay cash , they will quote you a higher price on the vehicle. One of the highest paying jobs in a dealership is the F&I guy. ( financing and insurance) This is usually the last step to buying a car. The salesman will turn you over to the F&I guy to finish out all your paperwork and sign contracts. A good F&I guy makes $100k to $150k a year. Some even can make as much as $250k at a high volume dealer. The F&I guy makes this because they generate a lot of profit for the dealer.

I just went through this. I decided to get a loan. The intrest was so low im taking the cash and paying off a rental property I have. The rental payments will pay the auto loan instead of going to the bank to pay for the house.

The loan I have on the rental was taken out years ago when raises were higher and I was young. Like 7.25%

I never refinance because I was in a bad auto wreck and my credit went south. I was discussed with banks and started using only cash for years not bothering to fix my credit for years. Now my credit is good but they they want to finance longer than I owe and closing cost eat up most savings.

Pay cash. Vehicles are horrible investments.

Never use cash if you have money and investments making10% or more and cars are going for 0% interest leave your money in the investment andhave them make your payment foryou.

Dealer makes more $$ on the financing side than selling cars.[/quote]
Very true on the financing. NEVER tell the salesman know you want to pay cash. Big mistake. Always play along that you are going to finance. Wait until the very last minute to spring the cash and want to go that route instead of financing. Wait until you have a set price carved into stone before mentioning cash. If you let them know you want to pay cash , they will quote you a higher price on the vehicle. One of the highest paying jobs in a dealership is the F&I guy. ( financing and insurance) This is usually the last step to buying a car. The salesman will turn you over to the F&I guy to finish out all your paperwork and sign contracts. A good F&I guy makes $100k to $150k a year. Some even can make as much as $250k at a high volume dealer. The F&I guy makes this because they generate a lot of profit for the dealer.[/quote]



Can you even barter on price anymore? You can't go across town and get another competitive offer to barter with anymore as all prices are posted on the internet. All the dealers already know what each other has.

Cash

There was a time when money market checking paid a much better rate and some car manufacturers offered zero percent loans. I once took the zero loan and then put the same amount of money in a money market checking account. I got free checking. Had GM draft the account each month until the loan was repaid. Interest earned was going to be mine at the end.

Downside was the free checking stopped when the balance fell below $10,000. At that point, just pay off the loan balance. All the interest I earned probably bought a hamburger and small fries.

Currently yes. But if you bought a used pickup the last few years, it wasnt a bad investment at all.

If you can get 0% interest then finance it. Reason Stock market is doing so well is people are borrowing against homes cars and anything and investing in stock market. 2-3 % loans and returns of 10-20 % . But as soon as interest rates rise it will crash.
Another thing is IF you use your savings and something happens you need the money then you are in trouble. Finance it for as long as you can !!!

NEVER EVER pay off a % percent interest loan !! NO up side Take the money and invest it in ANYTHING that will make you a buck. Flip kids bicycles , lawn mowers anything . Because every dollar made on a trade is more than you will get from paying off a ZERO percent loan.

If your buying a new car lots of the car dealers are offering 0% financing.

we just bought a new outback and got it for 0% for 63 months could of paid cash but figured we would leave money where it was and draw interest on it and just make payments on the car

I like your style!

I pay cash and sleep real good at night.

Did you ever notice one if the first questions a salesman will ask you us " How much do think you want to pay per month?"
This does a couple things. One it establishes you are not a cash customer and the salesman knows his commission is higher on a financed sale vs cash. Also if you reply for arguments sake , say $400 a month. The salesman has not put up any barriers to selling you the most expensive car on the lot. Even a $100k car can be had for $400 a month if you put down a crazy amount and extend the payments way out to say a 6-7-8 or more year loan. Also the salesman will try to put you into a $450 a month loan " It's only a little bit more , you can afford it , right?" It plays on your ego. The salesman will not put you into a $350 a month car.

Friend of mine was finance guy, he quit cause he couldn't live with sticking it to people.
Read and believe every word cragar typed. Financing big money making scam.

A rule of personal finance is, "never borrow money to purchase a declining asset". Your home is an increasing value asset. Real estate usually increases. Rarely does the value of a new car increase in value.

Cash or 0% financing only for me.
Jim

I would borrow the money, interest rates are low, money in the market will earn more than you pay in interest on the loan and you are paying the loan off with money you earn in the future and don't even have yet. Yes cars are poor investments which I always borrowed money for them instead of putting in my hard earned cash.


Bryce

My wife and I have always put away an imaginary payment every month so when it comes time to buy one we have the cash in hand. Whatever you do do not tell the dealership that you are paying cash. Make your deal as though you are going to buy it on credit as this is where the dealerships make their money. Once the deal is cut tell them you are paying cash. Do some research on YouTube.

Cash
Everybody here telling you how wise it is to borrow money never ever mentions the 'other' factor involved with borrowing ...RISK.
100% of all homes and vehicles repossesed had a loan against them. Who could have ever predicted the sudden loss of jobs in the past year and a half? Who can predict the next calamity that could cause loss of income..unexpected layoff, umexpected medical emergency, etc..?
Pay cash, then sock all the extra money you want into the market...win win

Inflation is going to run north of 3 percent this year. If you can borrow money for less than that there really isn't a negative downside to doing it.

Yes, there is...risk. market tanks and you lose your job ...there goes your truck. Market tanks and you get in an accident and cant work....there goes your truck. Etc etc
Just looking at things based on the percentages and numbers without factoring in risk seems foolish. I enjoy many of your posts on here about the financial markets, but we'll probably have to agree to disagree on this one.

Smart reply! But the other side of the decision is the insurance scam! Cost of insurance if I have a loan versus I own the vehicle and can pay for the state minimum coverage or somewhere in between. I own 8 vehicles between business and private and this also weighs in.

Pay cash if you have it. As Dave ramsey says cash is king.

Dave Ramsey has helped create and personally knows more “everyday millionaires “ than all of us put together.
He consistently preaches “ do not borrow money to buy a vechille” or a vehicle for that matter.
The amount of disinformation and down right wrong statements as fact is stunning. IE. the salesperson makes more commission when the car or truck is financed this is simply not true. Puzzle me this, if a car is sold with a 60 month 0% interest loan, where pray tell does the “extra “ commission come from?

I suppose that it depends on an individuals spending and saving habits. Per the OPs question, I wouldn't touch retirement money to pay for a new truck. I'd go out and buy a beater first.

Correct me if I'm wrong but I believe that the price of a vehicle can be had for less if a person finances outside the manufacturers financing system.

Just like everything at a stealership , zero financing is a scam.

Article from Dave Ramsey's website -
https://www.ramseysolutions.com/debt/zero-percent-financing

Pay cash
Never finance anything that depreciates

Cash depreciates.

It either has to be spent or invested.

Why wud you finance cash?
Why wud you buy cash?

Talking about inflation vs a set loan APR rate my guess.

Absolutely! Especially if you anticipate more inflation, which I personally do. Can you make more money with your cash than the low finance rates available today?

The Dealer makes a ton of money pushing those Extended Warranties . I recall being outside the Finance office, and had overheard the Finance guy give a speech to a customer ; that had just bought a new car. " Oh, the standard warranty from the manufacturer is good, but what about after the warranty expires?" etc.... Well, when it was my turn to go in the office, I got the exact same speech!

Yup , very high profit. Plus they will roll that right into the amount financed so you can pay interest on a product you will not be able to use until your factory warranty runs out. Getting nailed on both ends , paying interest on something you don't own or can't use yet. Pro tip - if you decline , someone from the manufacturer will call soon after purchase to sell you that same warranty generally at a lower cost. The dealer/ F&I guy will make you think there is only one chance to buy it now with them right there.

Another pro tip - if you are trading in a fairly new vehicle with a factory or extended warranty , the F&I guy will get what is known in the trade as a 'bump' on the backside of the deal . The F&I guy contacts the manufacturer or extended warranty company and bumps your warranty out. This lessens the warranty's obligation to serve that vehicle. Saves them a pile of cash. The F&I guy gets a bonus paid to him or the dealership.

Naw, more options if financed.

He could pay the loan off, or let it go back if he now needs his savings...the savings he didn't lay out for a new truck ad now might need for something else.

I'd be surprised if the REAL rate isn't closer to three times that!

I ask my financial guy this question , and he said pay cash ,which surprise me

Yep. we do the same thing.

You must not have read his ENTIRE post He has the money in the bank . So if market tanks or he looses his job he can THEN pay off the truck. OR trade it in for something less expense and live off the money in HIS account . Vehicles can be found at any price if you NEED one. But once his money is gone his safty net goes with it !!!

I can’t agree with very much with the article from Ramsey’s website, but then I think most of what Ramsey says is crap. He just wants you to buy his books and get hooked on his programs.

Yea that's WHY he needs to keep his !! You talking about the same guy that says rent , don't buy a house. Take a cab instead of buy a car ? That guy. One that became a millionaire from fools buying his step program to financial freedom?

Dave Ramsey is an idio t28% on a car loan ? I bought my last chevy at 0% interest for 72 months. Got the price for my trade -in and the vehicle in writing. 4800 below sticker , 29,000 trade in on a 2011 crew cab . Back in 2014. THEN the loan was calculated.
He must be talking about furniture or Mexican car lots... Or just spewing nonsense for others to believe.

PLUS he warns of a pandemic. LOL folks around here were making out like bandits because of covid hand outs STILL ARE . 1152 bucks a week during 600 fed money. Now 852 bucks. No wonder they won't go back to work ! Even with Ky math for a 40 hr work week that's over 20 bucks an hour !!!

Didnt read whole thread.
Pay cash but not for a new car. Never buy new. Low mileage 2 -3 yr old one.

First off a vehicle is not an investment. It is a tool just like a hammer or a screw driver. The idea of putting your cash in the stock market and buying the vehicle with a loan if flawed. Vehicle loans are short term and what stock market investment will guarantee a positive return for the next one to five years? What works best for me is to use as much cash as possible. Then I take out a five year loan at the low interest they will offer. Next step is to pay it off in one year. That's what I did with my 2017,2018 & 2021 Silverado's. Well the 2021 is only one month old and I have only made one payment, but I'm on track to pay it off in one year. BTW I don't care what Dave Ramsey or Bruce Williams is selling. Only ME knows what is best for ME. If I want a new truck and if I want to only keep it until the factory warrantee is used up I will do it even if Ramsey thinks I'm wasting money.

We just buy a used vehicle and save that roughly 40-50% of the new cost and borrow the rest. Yes there is risk in borrowing money but if I lost my job on the short term I would prefer to have the cash I used to buy the car for living expenses etc. Over time we learn which risks are very low versus high. Typically items that produce little or are expensive and not really needed to live and work are the more risky investments even with your own cash.

Bryce

I have done both,but too many dealers offering zero percent financing to pay cash these days.Just my opinion.

It's a proven system to get out of debt and build wealth. I listen to the people who have done it and built real wealth, not some person on the internet with an opinion.

We have followed the plan for 18 yrs and have zero 0 debt and on track to have a paid for house and have a seven figure net worth by age 45.

BTW, I have not bought anything from them in 15yrs.

Yep. There is a certain freedom and peace which comes with oweing no one anything.

Proverbs 22:7 (NIV), “The rich rule over the poor, and the borrower is slave to the lender.”

Where did the "money" come from to "invest in his program?
Who's them" What are you driving?
OK are you "on track" or is your house paid for ? Must be if you don't owe anything to anyone.
Not many working class can do that legally or without a silver spoon in some opening...

I will add My wife and I have been out of debt for 5 years now. Will I finance a car, land, ? Yes I'm 58 , shes 61, We have pretty substantial savings . BUT we won't spend it on any big ticket item because we want to enjoy that money. Why pay 250,000 for a farm that is a weekend play ground, and then have to watch your spending on buying "toys" to play on that land. Finance it. Pay 25,000 down. .30 year mortgage (we won't live that long) and enjoy it as long as we can along with the money you still have. As others have pointed out it will appreiciate in value. When were are dead the heirs can continue paying for it or sell it and keep the money left over. IF AND ONLY IF we were younger then I would consider paying cash. But only God knows what tomorrow brings. NOW tell me how much I will spend in interest .LOL Don't care it's not my primary home . My home is free and clear from debt. PLUS if I get too sick to enjoy the land it's sold with little or no strings attached.

Yes, unfortunately , too many folks dont mind being slave to the lender. Cracks me up when they get mad and try knocking Ramsey simply because they dont have the fortitude to get out of debt themselves. Silver spoons have nothing to do with it. Common sense and commitment is all it takes.

I think it depends on if you plan to keep the vehicle for a long time. If you do, then pay cash. If you are the type who likes a newer vehicle every few years, finance.
I agree with Marathon, better to buy used than new. A new vehicle depreciates too much in the first year or two. An example: I bought a truck that listed new for $42,000 two years later used for $28,000. It had 23,000 miles on it.

I agree Trapper, Ive never purchased new. I always hated to think about the immediate depreciation the second it drives off the lot.

This is almost as good as a vaccine or mask thread. Haha.

That method may work for you jbyrd but I will not be slave to any lender just to have a few more toys in the barn. There is pure freedom in debt free living.

Anyone that insists there's only one correct answer isn't qualified to even be giving advice.
Everyone has their own situation to consider.

Good point. Your last sentence is the most correct answer.

Magis, I think the OP got just what he asked for...a variety of opinions. He knows its his decision in the end. Finance discussions arent any different than trap discussions, car discussions etc.....we all have our opinions and we like to force them down everyone elses throats Lol i think we can all take a little bit away from it.

How is financing something being a slave. I bet 95%of USA is in debt. Heck Trump is in debt to his eyes but we still consider him rich ? ! Is he a slave? Also ALOT of freedom in having a solid rainy day stash too. More so than worrying about 1 monthly payment. Go 2 years without any debt and see were your credit score is headed.

Lol.... when things are paid off, why in the world would you need credit? You are right about the debt rate being high, thats part of what is ruining our country (my opinion). And also, why cant you have things paid off AND have a solid rainy day stash? Do you think one cancels the other out?

Thank you for the discussion guys. My friend ended up trading a vehicle in, 3000 cash, and financed the balance at 2.34%. Everyone's happy. 2021 Hyundai Santa Fe Calligraphy 2.5L turbocharged putting out 277 HP. 8 speed auto transmission. The investment is doing much better than 2.34%.

I kept my opinion to myself this time.

When you own a business you can use debt to your advantage. If you're a working class stiff like most of us, the advantages disappear. When your a slave to the lender, you have to spend more time working to make money to pay it back. When you are debt free, you obviously need less money. You can miss more work and live your life. Kinda obvious.

Ramsey is correct in a financial standpoint, not a personal choice standpoint. You're giving away a lot of extra money. Not right or wrong. Just a choice.

Congrats to you. I started the plan over a year ago. Debt free other than my house. Extra money goes to saving for next vehicle purchase, pounding down my mortgage, and investing more. I never realized the money I wasted until I got on the plan. Building my wealth and "living like no one else today, so I can live like no one else tomorrow". I'm on baby step #4. It's a great feeling. Wish I found him when I was 18.

I got everything off YouTube for free!

Good news Gary...glad your friend is happy

I bought a 2011 Ram new from a dealer. 0% financing for 60 months. I also bought the lifetime warranty from Dodge for $2500. It has paid for itself 3x over. If those options are still available the next time I need a new truck, count me in. I've seen no downside.

Those 2011 Rams with their air lift- California design, great for freeze-up in winter. Each lift is 2000$ replacement.

So what are your tax implications on interest paid for work vechicles in the USA ?

Gary what did he trade in ? Did he consider the cat could be worth 1000$

Sprung good for you but an event about 4 years ago change our outlook on life. Friends of ours pinched penny's never splurged saved , paid off early or paid cash, At 55 he was diagnosed with cancer and was dead 2 months later. They never traveled or went anywhere. No fun . Was going to tour Europe when they retired. Where did the "system get him ? Had a bank account full of money his wife and her new husband are spending right now.
Another couple we knew died in car accident , same tight wads . Kids peed thru that in 6 months. Make your choice right if it's yours !!

I was gonna buy a Ram next, but if you stuck that much money into it, I'll stick to the bow tie.

Like I said, no right or wrong. Just a choice. I'm very conservative by nature. I've passed lots of things up like you mention. I can't help it though. Just the way I am. Only live once and I might regret it...I have traveled a little. I'd rather do things and make memories than have things.

As I said, the $2500 has been repaid more than 3 fold over the 7 or so years after the factory warranty expired. What am I missing?

Thank God we all think very differently on many issues, large or small, it helps create opportunity and options for all of us. Cash is always good to have and or use but the fact that many are not wanting to use any debt makes it less costly for those of us who do use debt to manage our income, assets and standards of living.

Bryce

She. A 2017 Genesis G80. Needed something for mountain driving.

My favorite post on this thread. We're not all alike and we don't all think or act alike. Thank God.
Ah, if we could smile amidst the different strokes for different folks on these types of subjects... I imagine most do.

Blessings!
Mark

With that being said, I guess anyone who uses a credit card uses debt to manage their daily activities. I certainly do, and pay it off every month.

Talked with the neighbour who is a loans officer for a big credit union. She said with all the trouble the car companies had in 08 with too many cars from one lot not being paid for in the crunch, that they could not take them all in for non payment. Now the dealerships want 50% sold-cash before they leave the lot so they do not have this problem again.
We are set up for this to happen again as she sees it.

If your truck broke down that much, it's a piece of crap.

It's a dodge lol

I agree, but I'm not sure if the lifetime Service actually covers breakdowns. What it does is pay for all scheduled servicing, oil changes, tranny flush, timing belt, coolant change and flush, whatever they consider a service part. A friend of mine, older guy, had it on a Dodge diesel he bought new in 06. Not a bad deal for him, because he took it to the Dodge dealer for everything from replacing wiper blades to oil changes and it was all free. I do most all servicing myself, but if you are going to take it to a dealer to get serviced at the rates they charge the lifetime service package is a good deal, IF you plan on owning the truck for a long time.

Oh and I own a Dodge diesel. Other than the piece of crap auto tranny (had it rebuilt twice in a little over 100k since I bought the truck, and I drive like an old man, and do very little towing) it has been very good. 240k on it and the only thing I have had go wrong is an alternator and the aforementioned tranny.

Unfortunately the tranny is expensive, and I got talked out of converting to a manual, but next time it goes a clutch is going in that sucker!

I was referring to the lifetime warranty, not a service package. Didn't know they had that. My issues that were covered under the warranty were replacement of the steering gear box, lines, cooler, and pump. Seems something broke loose internally and blocked the flow of steering fluid. Also spun a camshaft bearing at around 150k. All covered, no questions asked. I'm happy.

The lifetime warranty covers only engine and transmission. I asked about it.
Also got a dent-removal package for about $150 for 3 years. Any dent under 4" in diameter. That's a great idea when we live in hail country.
Also got a gap coverage that covers what the insurance won't cover if in an accident. I've seen some horror stories about that.
This new Santa Fe with turbo and 8 speed auto transmission drives like a crotch rocket!

Sounds like that Santa Fe crotch rocket is going to be a Ticket collector. Good for ya.

We have used borrowed money on almost every vehicle be it new or used and we have never used the dealer financing at whatever rate of interest they were offering and we only bought an advanced warranty protection ONCE. We choose to go to our bank and work out all the details and amounts etc. with them prior to buying the vehicle. One advantage of using the bank has been that we keep some small low earning CDs in the bank and we have many times used them as collateral for the auto loan and we pay 2.5 % over what we earn on the CDs. The auto never becomes apart of the process. The last 3 we just included in our home equity loans with other items until we lost the itemized deduction option for us as our deductions do not rise above the new amounts.

Bryce

Gary said - "bought 2021 Hyundai Santa trading a vehicle in, 3000 cash, and financed the balance at 2.34%." To me the buyer lost on 4 different things in the purchase and the salesman is eating prime rib for dinner.

You is pretty smart.

This only applies to actual cash money, that may or not be drug money, not to withdrawals from a bank by check. On the other hand, you might want to keep that cash in the bank against emergency's. And if the interest rates skyrocket, you will be setting pretty with an extremely low locked in interest payment.

It makes no sense to pay more than you have to. Vehicles are already overpriced. I'd cut a check on a slightly used truck.

Inflation numbers for June came in at 5.4 percent, that means that 2.3 percent interest is a negative rate. July's numbers will be higher, hopefully for the stability of our country the inflation figures are "transitory" as the FED likes to say. I'm not buying it.

I understand what Dave Ramsey preaches, many people can't responsibly utilize debt, that doesn't mean it can't be done.

I'd say do whatever is best for each individual's temperament and situation.

No matter what though, I wouldn't take out retirement money to pay for a new car. I'd buy a used car first.

Have you priced out slightly used trucks lately? I seen a 2018 Silverado in lot the other day and they wanted 42k for it. That truck wasn't that much new.

Yes, I wouldn't buy anything for a couple years personally. However if he is set on purchasing now...

Crazy aint it. I bought a used pickup last winter, nothing fancy. I'm thinking I should sell it, I believe I could get 3 grand more than I paid for it.

I seen a 2015 GMC Sierra with 45K miles for 45K dollars. Yes, really.

You can buy cheaper with cash and even at 2.8% financing that adds up I pay cash and seldom buy new. New paint is expensive in my book plus you pay more in tax, insurance and plates.

Life and "life outlook" changing situations for sure. I get your point. Its about finding the balance to plan for the future and live for the now since tomorrow is not promised to any of us.

Why give your money to the bank? (Interest). Buy with cash and keep making fake payments to yourself for investing or for the next one.

We are spending at the level we enjoy and feel meets our needs. I don't mind having funds that will be inherited by our family we pass. If they blow it that is their choice, but after watching and working with them for 45 to 50 years I am not worried. We inherited nothing from our folks, nor did they from their folks nor did our grand parents. Don't feel bad about breaking away from tradition and helping one of our generations make some real middle class progress.

Bryce

I got a slush fund I saved up over the last year or two of about 75g under the mattress,only problem I already got a fairly new truck.