navpharm
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| Pay cash for new car? |
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I am in the market for a new car. Expect to spend about 30K on it. I have the cash to buy outright. I also have rental property with about 38K left on mortgage at 8.6% (high b/c I am second loan party). Is it better to pay the 30K to the principle on the rental property and take a 0% financing on the car for 60 months? Will that save me the most money in interest payments?
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Fri Jun 04, 2010 9:18 pm |
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oldguy
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I would retain the use of the entire $68,000 and invest it to earn money at a higher rate than the interest that you pay for the use of the money.
Can you fix the loan on the rental? Explain 'second loan party'. My rental mortgage is at 5.75%, at the time of my refi I paid about 1/4% premium for non-owner-occupied. I checked recently on one rental refi, the nonO-O premium is still 1/4% to 1/2%.
Car dealers have to pay for the 'cost of money', just like banks and credit unions, they have no free source of money. They can propose a deal that a customer desires - but the end cost is the same (after you account for the time value of money). He can sell you a $30k car @ 5% for 60m ($566/m). Or he can sell the car for $34k @ 0% for 60m (also $566/m). That is oversimplified, the time value of money is more complex, but it demonstrates the concept.
Personally, I have 100% financed my cars since the 1970's, I seldom pay cash for a car.
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Sat Jun 05, 2010 2:15 am |
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iwillguide
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| hi |
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i think better you go for cheap car and save the money then invest in a good stocks and you able to make double then buy the new car.may be sounds not a good idea but i always do the same if i have lot of cash in hands.
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Mon Jun 07, 2010 8:46 am |
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littleroc02us
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Personally, I would recommend putting 15k towards the mortgage and buy a 2 year nice used vehicle with cash. 60 days 0% interest is a bad deal on a new car. New cars depreciate around 60% in 4 years, so by year 4 your 30k vehicle is only worth $18,000. Your payments would be around $500 a month. After 4 years you would have around 24k in payments and you would only have around $6000 value. Not a good plan in my opinion.
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Mon Jun 07, 2010 1:20 pm |
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C9Consulting
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I wouldn't recommend buying a new car, buy a good one. And that's even if you need one. If you don't need another car, there's no reason to get one.
If you do absolutely NEED a car, buy one for about $15k (or less), then put the rest of the money to the rental property. $15k should get you a pretty decent car, I had a friend get an '07 Lexus with less than 50,000 for under $20k.
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Wed Jun 09, 2010 1:12 am |
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coaster
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Zero percent financing is an illusion. You're paying for the financing in the price. See if you can get a better price paying cash.
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Wed Jun 09, 2010 4:28 am |
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AlFromLA
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I agree 0 percent financing simply means they have calculated the finance charges in the car payment...
American cars tend to do that a lot just the beatify of American style finance & accounting 
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Thu Jun 10, 2010 10:50 pm |
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coaster
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quote:
Originally posted by AlFromLA
American style finance & accounting
exactly what got us into this last "Great Recession"
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Thu Jun 10, 2010 11:09 pm |
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jason_simpson
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You should never pay cash for a car. Period. Even wealthy people don't pay cash for cars. At least, not those that manage their wealth with any efficiency.
It would be a better option to pay the money for your mortgage loan instead paying fully for car.
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Tue Jun 15, 2010 4:27 pm |
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Offshore-Wealth.com
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| Re: Pay cash for new car? |
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quote:
Originally posted by navpharm
I am in the market for a new car. Expect to spend about 30K on it. I have the cash to buy outright. I also have rental property with about 38K left on mortgage at 8.6% (high b/c I am second loan party). Is it better to pay the 30K to the principle on the rental property and take a 0% financing on the car for 60 months? Will that save me the most money in interest payments?
Good question,
Personally, you should never purchase a depreciating asset with cash, you lose 30% immediately. If you want a new car, take the 0% interest route, this will save you thousands over the term, but unlike years ago where a dealer may advertise a low rate, this was a buy down as it was called in the industry, similar to paying points on a mortgage to lower percentage rate.
In todays market, when GM as example offers a zero percent rate, they will usually have in the small print a cash back offer as an alternative. You have to analyze the differences by calculating the savings on zero percent, verses the cash back, and you will usually see the zero percent savings as the more significant amount. With so many variables, you must check it closely. Nobody is in the same situation, so you have to weigh on aspects.
If you don't keep a car forever, then you are better off purchasing a couple year old vehicle in my opinion for the better deals are in the newer used car market. If you change vehicles often, and drive less than 12K a year, it is better to lease in this market of uncertain economic times where having a cash buffer is safer strategy. I would pay off your mortgage and refinance at lower rate. Also look to a credit union, they offer members lower rates and savings on both vehicle loans and mortgages.
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Thu Jun 17, 2010 6:03 pm |
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realraptor06
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Why pay cash for a car when you could invest the money in stock market or start a little business. 30k is not that much to start something, but it's better than to "lose" that money on an object. In 1 year you could easily double that amount.
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Fri Jun 18, 2010 12:29 pm |
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Adria.John
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If you have secured job , then payday loans are the best choice.
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Sun Jun 20, 2010 10:17 am |
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financialchoicenetwork
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| better option |
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I think it's a better option to pay the loan on principal
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Mon Jun 21, 2010 5:19 am |
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ed2009
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Whichever gives you the lowest interest rate, then thats what you keep. I bet the Car gives you higher interest rate, so why not pay it off in cash if you have some.
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Mon Jun 21, 2010 4:31 pm |
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littleroc02us
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quote:
Originally posted by jason_simpson
You should never pay cash for a car. Period. Even wealthy people don't pay cash for cars. At least, not those that manage their wealth with any efficiency.
It would be a better option to pay the money for your mortgage loan instead paying fully for car.
Where did you hear this? You couldn't be more wrong. Read the book "The millionaire next door". They did a study on self made millionaires and how they go about purchasing cars and what type of car they buy, how they pay for it and how old it is.
Romans 13:8 “Owe no man any thing, but to love one another: for he that loveth another hath fulfilled the law.”
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Tue Jun 22, 2010 2:14 pm |
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