How much are you paying for your car?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I've been fortunate enough to never have to take out a car loan. I drive a small sedan that I bought last year for $16k in cash.

Most people nationwide can't afford to do that and have car loans. All the people on this board who buy cars in cash are not your average people.

You have been dumb enough to never take out cheap loans to build wealth.
Savvy investors take other people money to make money.
If you can finance a car at 3% but decide to dump all your cash into it, you are not a savvy investor.
A savvy investor will take the 3% loan and invest the cash in a venture that produces a higher ROI.
That's what banks do. The take your deposits and give a laughable 0.5% (that's free money to them), and lend it to others for a higher rate.
All your people who buy cars in cash are dumb investors.

Ever heard of being risk averse? Lots of those risk takers go belly up after borrowing money.

Risk averse people never make money.

This risk averse person is planning to retire in 4 years at 55 with 2 houses and 5 rentals paid off, and 2mil in retirement saving...and I always pay for cash for cars and drive it for 10+ years.

[Anonymous]

Anonymous wrote:It's not a question of risk aversion. If you are offered a 0% loan, you can take the cash and invest it in a 1% CD and are guaranteed to make money.

1% return is not what PP is talking about. For 1% I don't to deal with a situation when I have to sell the car quickly and the title is still with the bank, or failed autopay, because your loan was sold and they changed rules.

[Anonymous]

Anonymous wrote:

Anonymous wrote:It's not a question of risk aversion. If you are offered a 0% loan, you can take the cash and invest it in a 1% CD and are guaranteed to make money.

1% return is not what PP is talking about. For 1% I don't to deal with a situation when I have to sell the car quickly and the title is still with the bank, or failed autopay, because your loan was sold and they changed rules.

Usually the 0% financing deals are offered by the manufacturer's finance arm (like VW Credit when you buy a VW), and they don't sell the loans. It's not like a mortgage.

ALso when you finance the car, you still get the title right away. It just has a lien marked on it. When you pay off the loan, you get the lien release letter in a few days.

If you did 0% financing and put the money in the bank at 1%, you'd never have a need to sell the car quickly to raise cash -- use the money already in the bank at 1%!

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:It's not a question of risk aversion. If you are offered a 0% loan, you can take the cash and invest it in a 1% CD and are guaranteed to make money.

1% return is not what PP is talking about. For 1% I don't to deal with a situation when I have to sell the car quickly and the title is still with the bank, or failed autopay, because your loan was sold and they changed rules.

Usually the 0% financing deals are offered by the manufacturer's finance arm (like VW Credit when you buy a VW), and they don't sell the loans. It's not like a mortgage.

ALso when you finance the car, you still get the title right away. It just has a lien marked on it. When you pay off the loan, you get the lien release letter in a few days.

If you did 0% financing and put the money in the bank at 1%, you'd never have a need to sell the car quickly to raise cash -- use the money already in the bank at 1%!

The need to sell the car because of the need to sell, not the need for the money. The title without a bank name on it helps with the sales price and speed. Clean title can easily offset 1% interest.
I am giving a reason why would people pay cash instead of 0% loan. It's for simplicity and less obligations. It's the same with how much money people keep in their "emergency fund". Some keep couple of months, some keep couple of years. Whatever makes people sleep better.
I remember getting my first 0% loan. I lasted two months and paid it off. It was bothering me.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:It's not a question of risk aversion. If you are offered a 0% loan, you can take the cash and invest it in a 1% CD and are guaranteed to make money.

1% return is not what PP is talking about. For 1% I don't to deal with a situation when I have to sell the car quickly and the title is still with the bank, or failed autopay, because your loan was sold and they changed rules.

Usually the 0% financing deals are offered by the manufacturer's finance arm (like VW Credit when you buy a VW), and they don't sell the loans. It's not like a mortgage.

ALso when you finance the car, you still get the title right away. It just has a lien marked on it. When you pay off the loan, you get the lien release letter in a few days.

If you did 0% financing and put the money in the bank at 1%, you'd never have a need to sell the car quickly to raise cash -- use the money already in the bank at 1%!

The need to sell the car because of the need to sell, not the need for the money. The title without a bank name on it helps with the sales price and speed. Clean title can easily offset 1% interest.
I am giving a reason why would people pay cash instead of 0% loan. It's for simplicity and less obligations. It's the same with how much money people keep in their "emergency fund". Some keep couple of months, some keep couple of years. Whatever makes people sleep better.
I remember getting my first 0% loan. I lasted two months and paid it off. It was bothering me.

We usually finance if the offer is 0%, even though we can easily pay in cash. We've always had the loan long paid off by the time we go to sell, but I suppose other people may need to sell quickly and still have the loan.

[Anonymous]

The zero financing has a cost. In almost all cases the potential rebate you can negotiate will be lower with zero percent financing than if you are paying cash.

As for the crazy that says you should borrow at three percent when you can pay cash instead, since you can get a higher rates of return by investing, I say, good luck. I hope that works out for you.

[Anonymous]

Anonymous wrote:The zero financing has a cost. In almost all cases the potential rebate you can negotiate will be lower with zero percent financing than if you are paying cash.

As for the crazy that says you should borrow at three percent when you can pay cash instead, since you can get a higher rates of return by investing, I say, good luck. I hope that works out for you.

It's the hubris of people who has never experienced prolong down market and precarious job/financial environments. They think they're financial wizards because the market average returns the last decade result from QE and artificially low interest rate.

[Anonymous]

Anonymous wrote:
The need to sell the car because of the need to sell, not the need for the money. The title without a bank name on it helps with the sales price and speed. Clean title can easily offset 1% interest.
I am giving a reason why would people pay cash instead of 0% loan. It's for simplicity and less obligations. It's the same with how much money people keep in their "emergency fund". Some keep couple of months, some keep couple of years. Whatever makes people sleep better.
I remember getting my first 0% loan. I lasted two months and paid it off. It was bothering me.

This is BS. A car without a lien on the title doesn't necessarily sell faster. If you need to sell your car, you can go to any dealer and sell it in 5 min.
You fear of borrowing even at 0% is an indication that you are not an investor. You are a saver. Savers can build a comfortable nest egg but they will not get rich.
The rich get rich by investing and they do it by borrowing other people's money.

[Anonymous]

Anonymous wrote:

This risk averse person is planning to retire in 4 years at 55 with 2 houses and 5 rentals paid off, and 2mil in retirement saving...and I always pay for cash for cars and drive it for 10+ years.

Sorry you are doing so poorly. Such an undiversified portfolio doesn't strike me as particularly risk averse.

[Anonymous]

Anonymous wrote:

As for the crazy that says you should borrow at three percent when you can pay cash instead, since you can get a higher rates of return by investing, I say, good luck. I hope that works out for you.

This post implicitly says that you are crazy if you carry a mortgage with a 3% after-tax interest rate and simultaneously have non-retirement investment accounts. After all, you could liquidate your investment accounts and pay down your mortgage. If you have a mortgage and investments and don't like to be called crazy, feel free to pick up your pitchforks and light your torches and go after this guy.

[Anonymous]

Anonymous wrote:The zero financing has a cost. In almost all cases the potential rebate you can negotiate will be lower with zero percent financing than if you are paying cash.

As for the crazy that says you should borrow at three percent when you can pay cash instead, since you can get a higher rates of return by investing, I say, good luck. I hope that works out for you.

It works for many. It works for banks. It works for businesses. It works for individuals.
You remind me of a friend who insisted on paying cash for everything. He doesn't use credit cards for that reason. He is basically afraid of CCs interest rates.
I explained to him that most cards give you a 21 days grace period, meaning that this is a 21 days 0% loan. Save your cash, use the free loan and pay in full before the grace period ends. Get a CC that give you the most points and you are coming way ahead of the cash paying customer.

The same friend insisted on purchasing properties cash. Many years ago we were looking at investment properties in FL. I bought a 4 unit rental property. I took a mortgage to finance my purchases, putting 50k down on each unit. He didn't want to borrow money, so he bought just 1 unit and paid cash. This was such a bad financial move but it was what he was comfortable with.

[Anonymous]

Anonymous wrote:

Anonymous wrote:
The need to sell the car because of the need to sell, not the need for the money. The title without a bank name on it helps with the sales price and speed. Clean title can easily offset 1% interest.
I am giving a reason why would people pay cash instead of 0% loan. It's for simplicity and less obligations. It's the same with how much money people keep in their "emergency fund". Some keep couple of months, some keep couple of years. Whatever makes people sleep better.
I remember getting my first 0% loan. I lasted two months and paid it off. It was bothering me.

This is BS. A car without a lien on the title doesn't necessarily sell faster. If you need to sell your car, you can go to any dealer and sell it in 5 min.
You fear of borrowing even at 0% is an indication that you are not an investor. You are a saver. Savers can build a comfortable nest egg but they will not get rich.
The rich get rich by investing and they do it by borrowing other people's money.

You are commingling taking a risk with money and keeping in the bank at 1%. I am not a risk taker and I don't want more complexity for 1% in the bank. Whatever I earn at 1% in a bank I will loose on trade in value plus more. Private party sale value is higher. Yes, I am a saver, I don't care about becoming rich. Having no car payments brings me more pleasure than stock that triple in value. It's called personal preference aka utility function and it does not have to be rational. With your logic, no better car should ever be bought unless you become rich. Stick with the cheapest car you can and invest on margin.

[Anonymous]

Anonymous wrote:

Anonymous wrote:The zero financing has a cost. In almost all cases the potential rebate you can negotiate will be lower with zero percent financing than if you are paying cash.

As for the crazy that says you should borrow at three percent when you can pay cash instead, since you can get a higher rates of return by investing, I say, good luck. I hope that works out for you.

It works for many. It works for banks. It works for businesses. It works for individuals.
You remind me of a friend who insisted on paying cash for everything. He doesn't use credit cards for that reason. He is basically afraid of CCs interest rates.
I explained to him that most cards give you a 21 days grace period, meaning that this is a 21 days 0% loan. Save your cash, use the free loan and pay in full before the grace period ends. Get a CC that give you the most points and you are coming way ahead of the cash paying customer.

The same friend insisted on purchasing properties cash. Many years ago we were looking at investment properties in FL. I bought a 4 unit rental property. I took a mortgage to finance my purchases, putting 50k down on each unit. He didn't want to borrow money, so he bought just 1 unit and paid cash. This was such a bad financial move but it was what he was comfortable with.

That's the key phrase. If he sleeps better at night because of it, it is worth all that "lost income".

[Anonymous]

I typically pay cash and am generally against car loans. However, I would absolutely take 0% for 60 months over paying cash.

[Anonymous]

I paid cash for an older car. So I pay $0 per month. Gotta keep savings for repairs though.