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How To Pay For New Car??

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billt
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How To Pay For New Car??  Reply with quote  

I'm retiring a year from November, and between now and then I am going to replace my car. Both of my current vehicles are 1991 Fords. A F-150 and a Mustang LX 5.0. I would like to keep the truck and sell the Mustang for something newer and nicer, with better fuel economy.

I'm trying to figure out the best way to pay for it. I can pay cash, but most of my money is tied up in tax deferred investments like IRA's and 401-K's. If I buy before I retire the car cost will get lumped on my W-2, and I'll get clobbered. I can wait until I retire, (November 2014), then make the purchase after the first of the year. My income will drop substantially after I retire, so the taxes won't be as bad.

What I would really like to do is purchase after retirement, and get 0% financing for 60 months. But I doubt they'll give me a 0%, 60 month loan if I'm not working. I could buy just before retirement, that would give me a good income to qualify for the 0%. I'm just not sure at this point how to proceed?
Post Wed Aug 28, 2013 7:51 pm
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oldguy
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quote:
But I doubt they'll give me a 0%, 60 month loan if I'm not working.


I've been retired for 15 years - bought a 2000, a 2001 truck, and a 2006 Van. In all 3 cases I 100% financed the loans for 5 years. I'm in your situation - if I sold $25,000 from a fund, I would pay taxes on the money - and if I leave it invested I earn a higher interest than the car loan - so I always finance 100% of the cost - plus I sell the old one privately and invest that money too.

As for the 0% financing - that doesn't really matter to the cost of a car. Car dealers don't have access to special rates, they pay the same to borrow money as we do. Right now the Credit Union rate is 2.85%. Dealers set up a Matrix to please various buyers, some buyers want a super low price for the car, some want super low interest rates. So the Matrix gives you a choice - eg, 25,000 and 3% - or $26,000 and 0% - and so on. In the end, the dealer gets the same price for the car. (No free lunch, lol)
Post Wed Aug 28, 2013 9:11 pm
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coaster
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Alternately, you could finance now and pay off the balance when you can take the distribution at a lower tax rate.

It is a good idea, though, to leave that money invested and untouched as long as possible.

~Tim~
Post Thu Aug 29, 2013 5:18 am
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littleroc02us
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You've worked your whole life and normally I wouldn't say this but it's time to enjoy a new vehicle so long as you pay off that stink'n loan the minute you stop working. I'm not in the camp of financing a vehicle for years to come. Personally when I retire I don't want any payments, just tons of disposable cash to play with and donate. Who needs the stress.

Risk comes from not knowing what you're doing. (Warren Buffet)
Post Fri Aug 30, 2013 4:31 pm
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