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.
When you pay low interest you have capital feee go to put other use in other investments.
Financing is cheap, and if that money is invested that is greater rate of return than dumping it into a depreciating asset.
^ This.
This. I bought a car with 1.99% APR financed from a credit union. No intention of paying it off early.
Where do you get 0% financing?
Generally only on new cars, through manufacturer financing.
Toyota puts that deal out from time to time on new Camrys
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
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
TVM is another important point
Main reason why I did it was to improve my credit score
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.
The only reason to pay cash is in this case dealer won’t force you to buy a full coverage insurance.
I think most people would prefer to have good insurance for their shiny new car
Not really, unless you are driving some expensive car. Mostly people have cars which cost 10-20% of their TC. Personally, I have maxed out liability insurance ($1M all around) and no damage coverage whatsoever. In the unlikely event of me totaling my car I will just buy another one with cash. But it needs to be mentioned that I don’t really buy new cars - I buy ones after lease, so 0% financing isn’t available for me
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.
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.
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
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.
Underrated response.
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??
At 0% you are making money if you are investing that capital instead of paying it up front...
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