JayTee

I asked this question in a different thread, but I figured I should put it on its own here.

What are the reasons why people chose to pay payment plans (w/financing) vs. straight cash? or vice versa?

I'm noticing that a lot of people seem to have the cash to pay for the TL yet opt for some sort of payment plan. Leasing is out of the option for me because I drive more than is worth it to lease. (120 mi./day work commute)

I don't like debt (or paying more than I need to) so I would like to pay cash for the TL. Whereas on the other hand, my wife is pushing for payments, so we can have cash free for other things (I don't need anything else, just a new Anthracite/Ebony Navi-TL ). She also can get ~4% financing through her credit union.

Any thoughts?

adam209

that's a personal decision. i know my parents have always paid cash for my cars because that way it's done and you forget about it. personally, i would pay cash for the car.

marquis

Well for one if you think you can take the cash you would have put down on the car and invest it in something that returns more than 4%, you come out ahead. If the cash is sitting in a savings account earning next to nothing, then by all means get it out of there and plunk it down on the TL.

It's also a question of whether chewing up that much liquid cash when looked at against the rest of your financial picture. You gotta look at the bigger picture.

moeronn

If you have $35k sitting in a savings account earning 0.5% interest, then you are better off paying cash for the car. If your $35k is in the market and making more than 5% in gains/dividends, then keep it there and make payments. Each person's situation and financial philosophy is different. I don't have $35k sitting anywhere, except maybe in home equity, so I'll be making payments when I finally get mine.

Edit: Yeah, what marquis said Looks like my post was a bit late.

jrudd

I have been in and around this business for a while. Trust me, most people can't pay cash for their car. They may act like it, but they can't. Second, it has never made since to me why you would put so much money into a depreciating asset. Your car is not an investment, period. Now tax breaks are another issue, but for the common person cars are not an investment. If you can get 4% take it and be done. I often hear people criticize those who finance for long terms, but if the interest is low it’s nice to have a low monthly payment. When you have the money pay more, remember there is no penalty for paying a loan off early.

Even if you have the money sitting there, you have it. When put into a car you lose it very quickly.

Zuubah

This topic gets into a whole clinton-load of opinions and possibilities...

My thoughts are these:
1. What the previous guys are saying is correct. If you can make a higher return on your money than the interest rate, you take the rate and finance. And vice versa.

2. You get into time vs. money. Is paying cash worth the time saved by writing checks each month, worrying about missing a payment etc.

3. (Feel free not to answer this one outloud) What does your financial plan look like? Do you have enough savings to keep the recommended 6 months of salary in savings, and pay for the TL with cash? Will this purchase affect your retirement plans?

4. Small money is easy to come by. In the grand scheme of things, you must decide if $500 a month for 5 years is easier for you to do than saving $35K. I would say that the financing is easier, since you are getting money every 2 weeks(or whatever).

5. Ultimately, you must make this decision on your own. But what a great problem to have!


~Z