2007-07-01 04:51:31 · 5 answers · asked by Anonymous in Cars & Transportation ➔ Buying & Selling
About the only reason to finance instead of paying cash is if you're earning a higher rate of return on your cash than you would be paying in interest on a loan.
For example, say you consistently earn 10% on your cash by trading stocks, while you can get a car loan at 6% interest. In this case, financing is the way to go since you are earning an extra 4% by keeping your cash in investments. However, keep in mind you pay tax on money earned from investments, and that the rate of return (especially in the stock market) can fluctuate wildly -- there's no guarantee you will keep earning 10%, or ANY positive return for that matter.
So, unless you are getting a crazy low interest rate (like 2.9% or below -- basically, an interest rate low enough that you could beat it through safe, stable investments like CDs), it's always better to pay cash.
The only caveat I'd add is that you shouldn't wipe out your savings by buying a car. A rule of thumb is to keep 3 months of living expenses in savings at all times, just in case. So, as long as you can keep that cushion in your savings, use the rest to pay off the car. It's a bigger sacrifice up front but it will save you a lot of money in the long-term.
2007-07-01 08:07:57 · answer #1 · answered by nevergonnaletyoudown 4 · 1⤊ 0⤋
Save if you can get to work another way. Rule of thumb is to only pay interest on things that are increasing in value, like a house.
2007-07-01 11:55:28 · answer #2 · answered by shirleykins 7 · 1⤊ 0⤋
It depend on your credit if you have none or bad credit its the best way to restablish or if you credit is good car notes suck
2007-07-01 14:08:45 · answer #3 · answered by CJ 2 · 1⤊ 0⤋
Definitely pay cash if at all possible.
2007-07-01 12:32:59 · answer #4 · answered by passit 3 · 1⤊ 0⤋
pay cash
2007-07-01 11:58:36 · answer #5 · answered by John 6 · 1⤊ 0⤋