^ Yeah, German's take a big hit in year one. Also, the higher priced items generally take a larger hit the first year. The A4 wasn't nearly as drastic as the A6 or E350... so we bought that one new at the time...

We've been looking at some Mini's recently and a 2010/2011 is not far off from the 2012's... but they are only low $20k new. Makes no sense to buy a 1-2 year old car for $18k-$19k at that point. But when looking at $50k-$60k cars, you can save quite a lot and not have to buy one that's more then 1-2 years old...

 

Oh no he didn't.

 

Yeah, we moved and the Scoobie is on it's way here. And which AB? Hahn, Zweibrücken, or Rhein Main? Been to all three (I was a Soldier here in the early 90's). I digress.

Now someone mentioned .9% financing. Unless the used / CPO route would save a bundle, then that or 0% is the way to go. With inflation, .9 or 0 is a loan for free, so why not. The big reason for new is the nice warranty, and cars like BMW, Volvo, and others are throwing in the services too (which can be another $500 - $1500 depending on the type of car).

I'm considering driving the Subaru for another year and maybe a trade for a new C350. But that all depends if I have to pay for a kids college tuition.

 

The $50k ones do. You can pickup a 2010 RL Tech I for ~16k off MSRP and under 30k miles. That's 31% in less than a 2 years. Now, my wife's 2009 Civic is worth ~$17.5k versus the $22.5k MSRP. That's 22.7% in 3 years.

I picked my RL up for 49% less than MSRP 3.5 years after it hit the lot.

 

On financing:

If you can comfortably afford to pay cash, but have the option of 0% or 0.9% financing, would you finance? Why or why not?

Junior mentioned credit scores, which I think is a great idea if you want to build it.

I would just pay cash so I don't have to worry about monthly payments or spending the money foolishly on something else.

 

Finance.

Inflation makes the value of an amount of money worth less over time. If the financing is less than inflation, then the value of a loan at the end of it's life is worth less than the amount of money paid into it. And that just assumes you don't use the money to gain a ROI.

If you can take the money used to buy a car and get a ROI greater than the financing %, then the difference in percent is profit you would not have if you had used all the money up front.

The only time it makes sense to put all of your money into one thing is when you can sell that thing for more than it was worth to begin with (it appreciates), adjusting for inflation, or the interest will cost you more than your ROI. Since cars never appreciate, if you can get a low rate, finance. It's free money.

 

Exactly.

I am financing two cars at 0.9% simply because I can take the $57,000 or so that would go towards those cars and instead make 6 or 7% at minimum.

 

Interesting thoughts guys... Again there is no right or wrong answer here given everyone's situation is different. But it seems the majority would finance since it seems to be the general best choice.

 

Personally, cash for private vehicles. Whatever the interest rate, I'm not paying interest of any sort on a depreciating asset (if you can call it an asset). Nor am I paying registration or any additional charges to carry the loan. Some people claim that the money used to outright purchase a car can at time be better used elsewhere if the car loan is attractive. Maybe so, but so is having a strong cash flow unencumbered by loan payments that can allow one to take advantage of other opportunities if they arise.

Corporately, I'll finance depending on the cost of the vehicle. Some trucks run well into the six figures. In this instance all interest, carrying, and registration charges are tax deductible so financing can at times be advantageous. The vehicle or equipment is also depreciated over a defined period. Leasing can also be attractive when acquiring large capital expenses as many manufacturers offer full maintenance and servicing programs over the leasing period. For the most part the lease payment is 100% tax deductible and if this deduction if greater over the leasing period than financing charges, it's definitely something to consider. Especially if the vehicle or equipment has no realized valued over a predetermined period.

In the end, it depends on one's situation. Most have to finance a vehicle, and if done responsibly it generally isn't a problem. In fact a vehicle is often a necessity. Financing an automotive "toy" or a vehicle on a whim, however, generally doesn't make a lot of fiscal sense. Anyway, just my old guy .

 

^

We always paid cash as well, but once we got rid of and sold the businesses, we took a little hit... so we financed a small amount on our last car to build up those scores. As I mentioned before, we didn't buy anything we couldn't pay cash for. We just took that cash and moved it to a longer term investment to yield higher interest rates. This way that money is not spent on something else, and we're making more then we're paying in interest.

And dead on with business vehicles. We're looking at another purchase and that will be financed and titled under the new business. Can never have too many deductions

 

Of course it is extremely important to understand you have to make payments and keep enough buffer in savings to cover these costs.

Terry, your old man may be influenced by the old economy where ALL interest rates were higher. I have heard of car loans back in the day that ran 12-13% interest. This obviously would not be overcome by inflation and would be damn hard to overcome with an investment. In the cases of that time, it would almost be a sure bet that paying cash would be a better option. However, 0.9% is practically nothing. The game has changed and the game plan should too. Just my young, and possibly naive,

 

I think it depends on the car. If you go looking for A5s or S5s you're going to be in for a surprise. I've seen 2009 S5s for $50k. A 2012 is $60-ish.

 

Absolutely. But there was no way I'd pay 12% either. I'd rather save for a car I could fix up, get some use of, and then run until the wheels fell off. All the time saving for something newer and better. This had a twofold effect, as it forced me to become more knowledgeable with the intricate workings of money as well as saving for a new car. As my knowledge increased, other advantages soon followed.

No, I'll be the old man and continue not choosing to finance a depreciating conveyance.

 

Terry, you're still a youngin!

 

What's that? Can't read the print. It's all blurry and small.

 

I haven't reached this benchmark yet since the TSX is the first car that's solely mine, but the game plan is 200,000 miles, or when I feel like the car can no longer reliably meet my driving needs (i.e., I'm cancelling long-distance driving plans because I don't think the car will make it). This policy, I've decided, won't preclude me from buying a second car in the future at some point though.

I bought the TSX CPO and saved roughly $8000 versus a new one (3.5 years old, ultra low mileage) which was totally worth it. Plus, I liked the 1G better than the 2G.

CPO luxury is the way to go- I was searching BMW's CPO page and saw tons and tons of 3-Series available at pretty nice discounts (upper $20s for a 2-3 year old car that was probably $37 or $38k new).

 

Love my CTS-V to death.

However, I am in the full grip of new car lust right now.

The object of my lust is the TSX Sport Wagon, an underpowered (on paper, anyway), smaller car that happens to look and handle great....even better than the sedan IMHO. It started as a crush when it was released but now that new car lust has taken over in the last few weeks, the crush has become enough that I've test driven it....and found it surprisingly only lacking in low-end torque. It was actually an enjoyable car to drive. Also test drove an A3 and an A4 sedan....but TSX is priced just right for my current needs.

I do have some logical reasons for considering it. I really do want to save and invest more, and paying as much as I do on the Cadi keeps me from doing that, so purchasing/financing a less expensive car will help with that.

Unfortunately, my financial epiphany coincides with a period of new car lust. As some of you state above, you buy when you want to. I have been trying to break the pattern, though without success. I'd really like to keep one car for 200,000 miles. I just don't think I'm the type, however.

BTW, car lust is how I ended up with the V, too, though with a little more planning. I lusted for two years and actually saved money for a down payment on it, then pounced when I got an irresistible deal on price.

I'm trying to hold out for a few more weeks, when I take the S2000 out of storage, so I can park the V for a while and think things through.

However, it is not going to be easy to resist the car lust, especially when I can justify the purchase so easily. It never is easy to resist driving to the dealer at this stage of car lust. Wish me luck!

I know some of you share this craziness from your comments above.

 

I get the "car lust" thing, but trading a V for a TSX-Wagon? I don't get that AT ALL. You might need professional help.

 

Yes, I probably do.

 

bob, can you run yourself through a CAT scan? Or do you need help (as in sell me your CTS-V)

Seriously, I might buy new again because us folks that work for Uncle Sam get a nice discount on certain cars. Plus no sales tax until we return to the US. So, the Volvo I bought cam out to $41.6K, no taxes at all. The price in the US would have been around $48K then tax. I also get free shipment back to the US and dealer prep.

BMW, Mini, Volvo, Jaguar, Range Rover, and Mercedes offer similar programs.