Why do people finance cars even if they have capital to buy?

4d 35 Comments

I see many people go down the financing route even when they have enough capital saved.

Are there any benefits. I know improving credit score is a small one but there are other ways to improve it.

Even if it’s 0% interest, just does not seem worth it. You are not saving a dime in the long run.


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TOP 35 Comments
  • Salesforce cyMD13
    At 0% you are making money if you are investing that capital instead of paying it up front...
    4d 4
    • It's never really 0% interest. Every time I've seen that, there's an incentive for paying in cash. That's the interest.
    • @IBM Really no though. The finance manager would love it if you go through him since he gets a cut of what's financed. Price is negotiated with the salesman, not finance
    • Sure but incentives come from the car company. Whenever a company is giving 0% interest, they're effectively just giving a discount on the car (usually just before the new model year launch). You'll also see a similar discount on the cash price at the same time ($2-3k).
    • Salesforce cyMD13
      Yes, I typically use all cash car purchase as a negotiation point. If they are willing to give me a discount that is more then what I think I could get investing that money in a low risk environment then I will go all cash. I have had it go both ways as it really matters on the current incentives.
  • Infor / IT teknican
    Financing is cheap, and if that money is invested that is greater rate of return than dumping it into a depreciating asset.
    4d 2
    • Facebook


      Amazon, Microsoft, The Walt Disney Company
      ^ This.
    • New / Property Dev Malta7
      This. I bought a car with 1.99% APR financed from a credit union. No intention of paying it off early.
  • Amazon mitbulls
    One extra note is inflation. 0% is worth it even if you don't invest it because $1 tomorrow will be worth less than $1 today. It costs the same number of dollars, but less in terms of wealth lost
    4d 0
  • Bloomberg / Eng

    Bloomberg Eng

    When you pay low interest you have capital feee go to put other use in other investments.
    4d 0
  • LinkedIn dontdo
    Finance a car and also get GAP insurance (500 bucks for every 20k). If you total your car, remaining payments are forgiven. That was biggest reason I choose financing even I had cash.
    4d 3
    • BigCommerce Vxjd54
      Underrated response.
    • Netflix v1.0
      If someone totals their car, wouldn’t the regular insurance (comprehensive) cover majority of the value of the car? Wouldn’t that cover a big chunk of the remaining payments??
    • LinkedIn dontdo
      Comprehensive insurance will pay you the KKK car value. Usually you owe more to bank then the car value at any point. (depreciation is not linear but payments are linear )
  • Microsoft weakdeak
    Main reason why I did it was to improve my credit score
    4d 1
    • Square JPXa66
      Same. I could have bought outright but instead I put 25k down on 65k. I have a 3% interest loan and am paying double the payment every month.
  • Facebook qocyevqk
    Because they are suckers.

    The reason why dealers push financing on people whether they can pay cash or not is simple: the dealer wants to get the buyer to start thinking in terms of monthly payments, so they can play tricks on them.

    "I got you a bunch of upgrades and your monthly payment didn't change" What they did is add a year of payments at the end.

    ^ This is one example but there are countless others.

    Don't be a sucker or waste your time hearing tricks, buy it in cash.
    4d 3
    • Verizon XobO37
      Any reasonably smart person can see through dealer tricks. When buying a car you should always have a finance calculator and know what you are willing to pay for a car.
    • Amazon de5i
      No, you don’t have to pay in cash. All you have to do is keep an eye on total amount. However, there’s another layer - those 0% interest loans are subsidized by manufacturers, there’s a chance you’ll be able to get better price if you pay cash
    • Salesforce vfofwo1r
      This is true. I'm completely paid off, but now I get fliers in the mail saying to buy a new version of the same car, and my monthly payment will be less than it was. But only after turning in the old car lol. It's a huge scam
  • Microsoft codingGuru
    Where do you get 0% financing?
    4d 3
    • Generally only on new cars, through manufacturer financing.
    • Intuitive Surgical ee2cs1
      Toyota puts that deal out from time to time on new Camrys
    • Salesforce cyMD13
      Majority of american car companies offer 0% via their finance arm. Think GM and Ford. I have noticed import companies typically wont go to 0%, but will offer .9%-1.9%.
  • Amazon mhfcvujk
    time value of money, folks

    but I still plopped down the cash bc financing requires a high tier of insurance and I save a carload by getting minimum allowed insurance
    4d 1
    • Instructure wowsers
      TVM is another important point
  • Bloomberg laura57
    It was by far the easiest way to improve my credit score. My APR was only .9% or something like that, which was a total of $500.
    Plus, while I could have bought the car, I would have been car rich and money poor, which is hardly wise.
    4d 0


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