We buy used cars for cash. I’m a little rough on cars and there will be damage before long. I don’t want to worry about a brand new car.

Anonymous wrote:I don't know why the financial acumen on this board is so terrible. Is everyone just a government drone who majored in poli sci or grievance studies? The economic answer is NOT "only finance when it is a low rate like 0% or 0.9%" as several people have parroted. The answer is that you finance when the finance rate is lower than the rate of return you would earn by investing the money.

No one is "parroting" that answer -- it's just what a lot of people choose to do. Personally I would still not take out a car loan at 3-4% even if that was was lower than the average rate of return on investment. Why? Because even if I could put the money in an investment vehicle at 6 or 7%, now I have to make a monthly payment on the car and that money is going to come out of my income most likely, which means it's money from my income that isn't going into savings/investments. The difference in what I could make off that income if I continued to save/invest it instead of using it for a car payment, and what I will earn by putting the cash lump sum I was going to spend on the car into an investment vehicle, is usually negligible. Plus there are advantages to keeping my monthly costs down in terms of financial flexibility, which has both tangible and intangible benefits.

So for me, if I can't finance at less than 1%, I won't finance at all. I also generally buy practical, used (2-3 years old, low mileage) cars and drive them until keeping them is more expensive than trading them in. So we're talking about 25k, not 60k. I'd rather just buy the car and not worry about a payment -- it is not a big factor in my investment strategies and the money for the car usually comes out of an emergency fund that gets fairly quickly replenished anyway.

But by all means, lecture people on "financial acumen."

Anonymous wrote:If you pay cash can you use a personal check and drive off with the car?

Or does it need to be a cashier's check?

I just did this (with a personal check).

It required me to give the dealer permission to do a "credit check" (to ensure I had sufficient funds in the bank).

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Sometimes they reduce the price if you use their financing. It could be worth it to take out financing then pay off the loan in a month or two.

I know a guy who does this. Signs up for a really bad 72 or 84 month loan with a high APR. The dealer will discount the price in the car because they think they will make a ton on the financing. I’m sure he’s not the only one that does this.

We do that every single time. I tell the finance guy that we'll take terrible terms in exchange for a discount. Dealership makes the first payment (they need one payment to get their rebate) and then we pay off the whole thing.

The dealer knows what is going on. They still get the rebate from the manufacturer. PP's "guy" friend isn't putting one over on the dealer, they are well aware and don't care.

That's the point. We let them make the first payment so that they can ensure they get their payment from the finance company. If you pay it off before then, they don't get a rebate. We learned this one years ago from a finance manager who said they'd been screwed by these deals in the past and now insisted on the dealership being responsible for the first payment.

Anonymous wrote:I don't know why the financial acumen on this board is so terrible. Is everyone just a government drone who majored in poli sci or grievance studies? The economic answer is NOT "only finance when it is a low rate like 0% or 0.9%" as several people have parroted. The answer is that you finance when the finance rate is lower than the rate of return you would earn by investing the money.

Please tell me what rate I am guaranteed to earn on my stock investments.

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Sometimes they reduce the price if you use their financing. It could be worth it to take out financing then pay off the loan in a month or two.

I know a guy who does this. Signs up for a really bad 72 or 84 month loan with a high APR. The dealer will discount the price in the car because they think they will make a ton on the financing. I’m sure he’s not the only one that does this.

We do that every single time. I tell the finance guy that we'll take terrible terms in exchange for a discount. Dealership makes the first payment (they need one payment to get their rebate) and then we pay off the whole thing.

The dealer knows what is going on. They still get the rebate from the manufacturer. PP's "guy" friend isn't putting one over on the dealer, they are well aware and don't care.

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I don't know why the financial acumen on this board is so terrible. Is everyone just a government drone who majored in poli sci or grievance studies? The economic answer is NOT "only finance when it is a low rate like 0% or 0.9%" as several people have parroted. The answer is that you finance when the finance rate is lower than the rate of return you would earn by investing the money.

And of course taking into account the taxes on the gain, if there are any.

What gain would there be on a car/car loan? I suppose you could sell a desirable car at a premium? Is that even reported? I don’t think we’ve ever had to report car sales on our taxes, although we always keep them forever and sell them to car max for $4-5k so no chance for gains.

I think people are using the 0-1% as a rule of thumb. Yes, the technical definition is correct but many will just glaze over at that. Keep it simple.

I believe the PP was referring to fact that if you earn $500 investing your $20K you would have paid for the car, then you have to pay taxes on that $500. So just remember to take the taxes into consideration when deciding if a loan is a good deal vs investing the money in a CD/MM.

Anonymous wrote:

Anonymous wrote:I don't know why the financial acumen on this board is so terrible. Is everyone just a government drone who majored in poli sci or grievance studies? The economic answer is NOT "only finance when it is a low rate like 0% or 0.9%" as several people have parroted. The answer is that you finance when the finance rate is lower than the rate of return you would earn by investing the money.

And of course taking into account the taxes on the gain, if there are any.

What gain would there be on a car/car loan? I suppose you could sell a desirable car at a premium? Is that even reported? I don’t think we’ve ever had to report car sales on our taxes, although we always keep them forever and sell them to car max for $4-5k so no chance for gains.

I think people are using the 0-1% as a rule of thumb. Yes, the technical definition is correct but many will just glaze over at that. Keep it simple.

Anonymous wrote:

Anonymous wrote:Sometimes they reduce the price if you use their financing. It could be worth it to take out financing then pay off the loan in a month or two.

I know a guy who does this. Signs up for a really bad 72 or 84 month loan with a high APR. The dealer will discount the price in the car because they think they will make a ton on the financing. I’m sure he’s not the only one that does this.

We do that every single time. I tell the finance guy that we'll take terrible terms in exchange for a discount. Dealership makes the first payment (they need one payment to get their rebate) and then we pay off the whole thing.

Anonymous wrote:I don't know why the financial acumen on this board is so terrible. Is everyone just a government drone who majored in poli sci or grievance studies? The economic answer is NOT "only finance when it is a low rate like 0% or 0.9%" as several people have parroted. The answer is that you finance when the finance rate is lower than the rate of return you would earn by investing the money.

That's the same thing, but the first option avoids spending a lot of time and/or money and variance risk to make the measurement.

Anonymous wrote:I don't know why the financial acumen on this board is so terrible. Is everyone just a government drone who majored in poli sci or grievance studies? The economic answer is NOT "only finance when it is a low rate like 0% or 0.9%" as several people have parroted. The answer is that you finance when the finance rate is lower than the rate of return you would earn by investing the money.

This!

Anonymous wrote:I don't know why the financial acumen on this board is so terrible. Is everyone just a government drone who majored in poli sci or grievance studies? The economic answer is NOT "only finance when it is a low rate like 0% or 0.9%" as several people have parroted. The answer is that you finance when the finance rate is lower than the rate of return you would earn by investing the money.

And of course taking into account the taxes on the gain, if there are any.

Anonymous wrote:People who have done this, do you negotiate a cash price and then ask for a discount for financing?

Not in my experience. Most places now tell you that x portion of the discount is only if you use their financing. If you try to bait and switch them it will change the price - they are on to that.

I don't know why the financial acumen on this board is so terrible. Is everyone just a government drone who majored in poli sci or grievance studies? The economic answer is NOT "only finance when it is a low rate like 0% or 0.9%" as several people have parroted. The answer is that you finance when the finance rate is lower than the rate of return you would earn by investing the money.

Anonymous wrote:If you pay cash can you use a personal check and drive off with the car?

Or does it need to be a cashier's check?

I used a personal check.