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Started By
Message
When should you buy a car with cash vs financing at 0%?
Posted on 11/21/16 at 3:43 pm
Posted on 11/21/16 at 3:43 pm
I have enough cash to buy a new car, but I can get 0% financing (for first 4 years). At first, it seemed like a no brainer to just finance the car and invest my cash, right? Or will a dealership really give you a huge markdown if you pay in cash?
For instance, let's say I want to by a car that I can get at a fair price for $35K (not MSRP). If I work the salesman down to that price and then say, "how much can you offer if I pay cash?", will he come down at all. If I took that $35K and reinvested it in an index, and withdrew from it each month to make my payments, I should probably make anywhere from $3.3K to $6.6K return on investment (assuming a conservative 4-6% range). Has anyone ever had an experience where they received significant discount in buying with cash to justify not reinvesting money?
For instance, let's say I want to by a car that I can get at a fair price for $35K (not MSRP). If I work the salesman down to that price and then say, "how much can you offer if I pay cash?", will he come down at all. If I took that $35K and reinvested it in an index, and withdrew from it each month to make my payments, I should probably make anywhere from $3.3K to $6.6K return on investment (assuming a conservative 4-6% range). Has anyone ever had an experience where they received significant discount in buying with cash to justify not reinvesting money?
This post was edited on 11/21/16 at 3:46 pm
7
Posted on 11/21/16 at 3:51 pm to SUB
As a auto sales person, we hear 'what is your best cash price', all the time. Dealership would rather you finance, get a kick back from finance company. So would go with 0% if I was you. What brand are you looking at?
Posted on 11/21/16 at 4:00 pm to SUB
0% all day. i love free money.
Posted on 11/21/16 at 4:24 pm to SUB
quote:
0% all day.
Posted on 11/21/16 at 4:35 pm to CoachRobertson
quote:
What brand are you looking at?
I'm not even sure yet!
Thanks for your input!
Posted on 11/21/16 at 7:48 pm to SUB
If you take 0% you usually have to give up any incentives. Take that into consideration also.
Posted on 11/21/16 at 8:01 pm to SUB
Pay cash if you have it. Even at 0% you'll just go out and spend money on something else. Pay the cash and you'll be focused on replenishing the cash. You'll thank yourself in a year !
Posted on 11/21/16 at 8:23 pm to Teauxler
I don't know about auto financing specifically, but in general 0% financing for X amount of time generally means that you actually pay all the interest as soon as that X amount of time is up. For example if you do 0% financing for 4 years but it's a 5 year loan with 2.99% interest then the entirety of that 5 years and 2.99% interest is paid during the 5th year. It's all a marketing gimmick. Now, you can pay the car off by the 4th year and as long as there are no penalties it works out as actual 0%.
Also, as said with 0% loans they usually don't give any rebates. So know what you are getting into.
Yes, I mean investing the money for 47 months and then paying the loan off on the 48th month would work out as you planned.
Also, as said with 0% loans they usually don't give any rebates. So know what you are getting into.
Yes, I mean investing the money for 47 months and then paying the loan off on the 48th month would work out as you planned.
Posted on 11/21/16 at 10:17 pm to Teauxler
I'm not spending the money on other stuff. I'm fairly frugal and will not spend $35k on something else. I'd rather my money work for me.
Posted on 11/21/16 at 11:02 pm to SUB
I'd take advantage of the interest-free money over the life of the note.
Posted on 11/22/16 at 8:48 am to baldona
quote:No that's not how 0% car loans work. You are thinking of "same as cash" type loans for furniture and stuff like that. Car loans are just 0%. But you are right about the incentives.
I don't know about auto financing specifically, but in general 0% financing for X amount of time generally means that you actually pay all the interest as soon as that X amount of time is up. For example if you do 0% financing for 4 years but it's a 5 year loan with 2.99% interest then the entirety of that 5 years and 2.99% interest is paid during the 5th year. It's all a marketing gimmick. Now, you can pay the car off by the 4th year and as long as there are no penalties it works out as actual 0%.
Posted on 11/22/16 at 9:13 am to SUB
quote:
I should probably make anywhere from $3.3K to $6.6K return on investment
I work at a Toyota dealership and it depends on what car you are purchasing. We will discount the Camry $6000 if you finance through SETF, if you pay cash we discount it $4000. I am sure most dealerships would be the same. The $3.3k to $6.6k is much greater than the $2000 you would save.
Posted on 11/22/16 at 9:36 am to SUB
Free money is my preference. I don't need someone else to hold my money for me because of discipline issues.
Posted on 11/22/16 at 9:48 am to baldona
quote:
I don't know about auto financing specifically, but in general 0% financing for X amount of time generally means that you actually pay all the interest as soon as that X amount of time is up. For example if you do 0% financing for 4 years but it's a 5 year loan with 2.99% interest then the entirety of that 5 years and 2.99% interest is paid during the 5th year. It's all a marketing gimmick. Now, you can pay the car off by the 4th year and as long as there are no penalties it works out as actual 0%.
That's not how it works for cars. Both vehicles in my household are on 0% loans. On both, we negotiated the price, add in whatever taxes and fees, and divide that number by the number of months. There is no gimmick to it. I also got all incentives offered on top of the 0%.
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