Anonymous wrote:

Anonymous wrote:

why buy him a depreciating asset. set the money aside for a future down payment on a hoyuse

+ 100 Especially when you have to pay interest to buy him the depreciating asset . . . you are foolish.

Why is financing at less than 2% foolish, when it allows me to keep money invested elsewhere making 10%? And if done in his name, it helps him with credit.

Please share where you are making 10%

Your best bet is to buy a $10,000 car since that is how much you have to spend. That way you save the $311 interest charges plus the loan origination fee and whatever else they tack on (hidden fees). Plus you get the $3500 from your Vanguard account. Total win.

Plus, who will be making the monthly payments? You or your son? If the car is totaled in an accident, you could end up buying a new car for him while continuing to pay off the old one. Also, the insurance on a 20K car is going to be more than on a 10K car. Plus the personal property tax will be higher as well.

Anonymous wrote:

Why is financing at less than 2% foolish, when it allows me to keep money invested elsewhere making 10%? And if done in his name, it helps him with credit.

If you pay cash, you can negotiate a better deal on the price of the car and that could very well (in fact most likely will) amount to more than 10% invested for the period of time of your paying off the car. We have done this many times. The dealerships are more than happy to do this as they get the 10% interest you are talking about. Cash is king.

As far as your son's credit, that should not be a problem if he has a credit card that he pays off or if he can prove income from a job. I never needed my parents to buy me a car in order to get "credit". That's a red herring.

Hey, if you want to buy your son a car, buy him a car. Don't ask about it on DCUM. I think you are asking because you don't really have enough money to buy a new car without the financing and that concerns you. As it should.

That's the thing. I'm not asking whether or not to buy him a car, I'm asking if anyone else has done it, and how did they structure it, including how they handled insurance. I've got about $30,000 short term savings that goes to things like vacations, and just to "have." I don't feel comfortable pulling $20,000 of that out. I feel fine doing $10,000.

As far as whether I get a better deal on a car with cash or not, I negotiate the price first without discussing trade-ins or down payments. Otherwise, I know they definitely build in padding one way or the other. Are you saying that if I then tell them I'm paying all cash, they will then lower the offered selling price? Everything I've read says you get a better price with financing. And if I can get financing at 2% or under, I'd be paying $311 over the life of the loan in interest. Compared to the $3,500 I'd make just letting the $10,000 sit in the Vanguard account.

Think about this . . .

If you can make 10% on that money and the dealership makes only 2%, why the heck do they give you the 2% loan?

I'll tell you why. Because they are charging you more for the car because you are financing it. Trust me. You get a better price if you don't finance. Don't be fooled.

Why is financing at less than 2% foolish, when it allows me to keep money invested elsewhere making 10%? And if done in his name, it helps him with credit.

If you pay cash, you can negotiate a better deal on the price of the car and that could very well (in fact most likely will) amount to more than 10% invested for the period of time of your paying off the car. We have done this many times. The dealerships are more than happy to do this as they get the 10% interest you are talking about. Cash is king.

As far as your son's credit, that should not be a problem if he has a credit card that he pays off or if he can prove income from a job. I never needed my parents to buy me a car in order to get "credit". That's a red herring.

Hey, if you want to buy your son a car, buy him a car. Don't ask about it on DCUM. I think you are asking because you don't really have enough money to buy a new car without the financing and that concerns you. As it should.

It's not an investment. It's a gift. In this case also a necessity.

But it's a gift that the giver is financing. It's also debatable whether a new car is a "necessity".

Anonymous wrote:

why buy him a depreciating asset. set the money aside for a future down payment on a hoyuse

+ 100 Especially when you have to pay interest to buy him the depreciating asset . . . you are foolish.

Why is financing at less than 2% foolish, when it allows me to keep money invested elsewhere making 10%? And if done in his name, it helps him with credit.

Anonymous wrote:why buy him a depreciating asset. set the money aside for a future down payment on a hoyuse

It's not an investment. It's a gift. In this case also a necessity.

why buy him a depreciating asset. set the money aside for a future down payment on a hoyuse

+ 100 Especially when you have to pay interest to buy him the depreciating asset . . . you are foolish.

Off, stupid phone deleted the word

Anonymous wrote:Do the car shopping together. You'll want input but he'll have preferences too.

If mom or dad is buying the car then son can keep his preferences to himself or buy his own car.

You're better than me OP because I wouldn't buy my kid a car. I didn't get one when I graduated, I worked my behind so I could buy myself one.

why buy him a depreciating asset. set the money aside for a future down payment on a hoyuse

Anonymous wrote:I think if you can't comfortably pay cash, you can't afford it. The kid has a car, this is a luxury purchase, not a need. I'd rather teach my kid not to finance a car.

The car he's driving is 14 years old with very little safety equipment.

Mistake . . .


Wow, how sad for you that your relationship with your kids ( if you have them) isn't strong enough for you to trust them.

Not either PP. I don't think this has anything to do with "trust". I have a very strong relationship with my son; strong enough that he knows I can afford to buy him just about anything without financing, but he also knows that the lessons learned about personal responsibility are way more valuable than anything else. That's how strong the relationship is. We talk about these things. I want him to stand on his own two feet and not ride on my wealth. At all. I grew up this way and it served me very, very well. I have come to appreciate my father very, very much (in my old age---LOL).

I think if you can't comfortably pay cash, you can't afford it. The kid has a car, this is a luxury purchase, not a need. I'd rather teach my kid not to finance a car.