Ask HN: Should you buy a car with cash if you can afford it?

#1

Post by brundolf » Tue, Jun 08, 2021, 1:12 AM UTC

I may be buying a car soon (nothing fancy) and I should be able to comfortably afford it without a loan. So I'd avoid interest, but this would mean I couldn't have that money in investments during whatever the loan period would have been. So it's unclear which approach works out to be better overall.

Obviously the exact answer depends on a lot of specific numbers that I'm not laying out, but broadly speaking, is this a sensible thing that people sometimes do or is it likely a bad idea?

Re: Ask HN: Should you buy a car with cash if you can afford it?

#2

Post by rolph » Tue, Jun 08, 2021, 1:15 AM UTC

the optics of large cash transactions are still dicey. even if you are doing nothing wrong, make sure your not going to be hassled

Re: Ask HN: Should you buy a car with cash if you can afford it?

#3

Post by iab » Tue, Jun 08, 2021, 1:21 AM UTC

If you can get 0% apr for 60/72 months, why not do that? Also seems like there is more negotiation done when financed vs cash.

https://www.carfax.com/blog/0-apr-car-deals

Re: Ask HN: Should you buy a car with cash if you can afford it?

#4

Post by brundolf » Tue, Jun 08, 2021, 1:24 AM UTC

iab wrote: post #3

If you can get 0% apr for 60/72 months, why not do that? Also seems like there is more negotiation done when financed vs cash. https://www.carfax.com/blog/0-apr-car-deals

I didn't even realize 0% was possible (this would be my first time actually shopping for a car)

Re: Ask HN: Should you buy a car with cash if you can afford it?

#5

Post by brundolf » Tue, Jun 08, 2021, 1:29 AM UTC

rolph wrote: post #2

the optics of large cash transactions are still dicey. even if you are doing nothing wrong, make sure your not going to be hassled

Like by the govt? Hadn't thought about that, good thing to think about

Re: Ask HN: Should you buy a car with cash if you can afford it?

#6

Post by rolph » Tue, Jun 08, 2021, 1:33 AM UTC

brundolf wrote: post #5

rolph wrote: post #2

the optics of large cash transactions are still dicey. even if you are doing nothing wrong, make sure your not going to be hassled

Like by the govt? Hadn't thought about that, good thing to think about

a number of cash payments would look quite normal, if you arranged a payment plan on paper but actually exchanged xthousand dollars for a vehicle all at once, it could be stimulating for IRS, or maybe DEA depending on exact situation

Re: Ask HN: Should you buy a car with cash if you can afford it?

#7

Post by hkarthik » Tue, Jun 08, 2021, 1:43 AM UTC

It really depends on the financing rate. At below 3.0%, it doesn't make sense to put too much cash into a depreciating asset like a car when your money could be put toward other investments that can probably net more than 4% return.

I still feel better paying off a car in 3 years rather than 5, so I usually suggest making a few extra payments to make that happen.

You will get a better deal with more incentives with dealer purchased cars if you finance. They may give you more for a trade and negotiate more on the final price. Perhaps even give you a few extra options for free.

Re: Ask HN: Should you buy a car with cash if you can afford it?

#8

Post by brundolf » Tue, Jun 08, 2021, 1:54 AM UTC

hkarthik wrote: post #7

It really depends on the financing rate. At below 3.0%, it doesn't make sense to put too much cash into a depreciating asset like a car when your money could be put toward other investments that can probably net more than 4% return. I still feel better paying off a car in 3 years rather than 5, so I usually suggest making a few extra payments to make that happen. You will get a better deal with more incentives with d…

Weird. Why would they do that?

Re: Ask HN: Should you buy a car with cash if you can afford it?

#9

Post by yuppie_scum » Tue, Jun 08, 2021, 1:57 AM UTC

rolph wrote: post #6

brundolf wrote: post #5

Earlier quoted context omitted.

Like by the govt? Hadn't thought about that, good thing to think about

a number of cash payments would look quite normal, if you arranged a payment plan on paper but actually exchanged xthousand dollars for a vehicle all at once, it could be stimulating for IRS, or maybe DEA depending on exact situation

How does the IRS even find out you buy a car? There’s no federal sales tax. You just pay your state taxes.

If it’s a “nothing fancy” car, maybe a 30k accord or less, and he has a good income, it’s not going to raise any flags with either state or fed.

Bottom line - pay your taxes and you’ll be fine.

I can’t emphasize enough how good a feeling it is to have the title to your own car.

Re: Ask HN: Should you buy a car with cash if you can afford it?

#10

Post by jqpabc123 » Tue, Jun 08, 2021, 2:05 AM UTC

The answer should be obvious.

Is the return from investments more than you would pay in interest on a car loan?

If yes, then take out a loan for the maximum amount possible and invest the remaining, available funds that would have gone toward the car and you will come out ahead. Otherwise, just forget the loan and pay cash.