Financing vs. cash

I'd suggest cash if you can. There are easier ways to build credit.

You should ask this on the OT, you would fit right in

The biggest question I would have is what interest rate you qualify for. If you can borrow at a really low rate then I would do that and put your spare cash that you didn't use in a tax-advantaged account like a 401 or IRA. That gets you the best of both worlds. There's nothing wrong with borrowing money if you can invest what you have at a higher return, in fact that is exactly how bankers get rich.

That said, if you don't qualify for a low rate (you mentioned you're just getting started) then it may be better not to do this if you have the cash.

Another option is to go ahead and finance the car and next month pay off as much as you can. Dealers will sometimes knock money off the sticker price if you finance with them, just be sure there is no prepayment penalty in the financing contract.

Thanks for the help! I thought cash was a no brained but wife wanted me to look at other options.

Agree with Foshizzel on this one. Here is my wife and my last experience.

In 2011 we bought a new car for the first time in a long time. Long story but I’ll stick to the financing side.

We didn’t tell them we wanted to pay in cash until we agreed on a price. At that time we said we wanted to put the entire purchase on a credit card. We have with a high enough limit on it to cover the purchase. They agreed. We had the cash to pay off the credit card in full when they bill came. We wanted the 2% cash back we get from the credit card. When it came time to swipe the card they told us that we could only put 5% of the purchase price on the card. We walked away. After a short time they contacted us and said they would give us 1% financing. We weren’t happy but decided to get the car because it was a good price on a car that had what my wife wanted and didn’t have what she didn’t want. We used the credit card for the 5% down which we paid off as soon as the bill arrives. I took half of the rest of the money we had in a money market account that we had used to save for the car and put it in Vanguard Wellesley mutual fund. From July of last year to June of this year it is up about 10%.

The bottom line, so far at least, is that low financing worked better for me than cash.

penfed is doing 1.5% right now, no reason to pay with cash when you can get basically free money

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penfed is doing 1.5% right now, no reason to pay with cash when you can get basically free money

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If he can qualify for that rate, I agree and that is what I would do so I could use the cash to invest rather than buy a depreciating asset like a car. In fact, I have my HELOC with Penfed and have generally been pleased with them, enough so that I just applied for a refi on the mortgage itself with them.

Again though the key is use the cash roductively, borrowed or not.

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With the low interest rates, I'd imagine cash in hand helps a business more than financing. They could make the money work for them right away. That's why they are willing to drop the cost a bit.

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the dealership isn't financing it themselves, they have cash in hand either way