Financing vs Cash
01-12-2008, 10:57 AM
#51
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Originally Posted by Axel6,Jan 10 2008, 06:40 PM
The financially responsible thing is to buy the car outright and not pay interest. That being said, there are some manufacturers out there that are GIVING money away.
Case in point...my wife and I recently bought a 2007 Sienna and financed for 1.9%. There are offers out there for 0%!!! If you can find a ridiculously low rate like this, you take it under the premise that a dollar in your pocket is worth more than the same dollar in someone else's (opportunity cost of capital).
Case in point...my wife and I recently bought a 2007 Sienna and financed for 1.9%. There are offers out there for 0%!!! If you can find a ridiculously low rate like this, you take it under the premise that a dollar in your pocket is worth more than the same dollar in someone else's (opportunity cost of capital).
01-12-2008, 06:00 PM
#52
Originally Posted by b00stn,Jan 12 2008, 01:57 PM
Bingo. It is completely dependent on the interest rate you would get on the loan. If you get one of those 0% loans or one like this poster mentioned (1.9%), it makes more sense take the loan. Reason being is you can take you can invest your money and come out ahead. Hell, there are checking accounts that pay over 4% now. 4% - 1.9% = 2.1% extra in your pocket. Even bigger potential profits if you invest, but you can get at least 4% guaranteed. Now if you bought outright, your potential to earn any interest is gone. But if the interest rate is higher on the loan, it would be smarter to buy outright. Also depends on your credit score and whether you could need to develop a credit history.
\You have to pay taxes on that 4%, but the 1.9% isn't tax deductible. Assuming a 30% marginal tax rate, the differential is (4.1% * ( 1 - 30%)) - 1.9% = 0.97%. Your arbitrage just got more than halved by Uncle Sam.
01-12-2008, 08:21 PM
#53
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I am financing my S2000, and hold the title to my DD. I feel that it pays to have patience and drive a piece of crap for some years while you save up to buy a nice car, because you save a lot of money in finance charges. On the other hand, you could get hit by a bus tomorrow... So, I financed the car.
Remember that cars are a waste of money nearly all of the time, and especially if they're purchased less than 3 years old and more than a box with 4 wheels which gets you to work and back and keeps you from getting killed in a crash.
Since the S2000 is far more than that, and costs more as a result, it's certainly a frivolous purchase for anyone. In fact the same thing could be said for nearly anything else enjoyable in life. Anything that involves or attracts girls is probably frivolous.
Point being, it's not "smart" or financially responsible to pay cash for an S2000, but it is slightly more financially responsible than financing one.
Remember that cars are a waste of money nearly all of the time, and especially if they're purchased less than 3 years old and more than a box with 4 wheels which gets you to work and back and keeps you from getting killed in a crash.
Since the S2000 is far more than that, and costs more as a result, it's certainly a frivolous purchase for anyone. In fact the same thing could be said for nearly anything else enjoyable in life. Anything that involves or attracts girls is probably frivolous.
Point being, it's not "smart" or financially responsible to pay cash for an S2000, but it is slightly more financially responsible than financing one.
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