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

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

#11

Post by yellow_lead »

brundolf wrote: post #8
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?

They make that extra X% on the loan. For a 30k car at 3% that's nearly 1k. Also, the loan could be worth more due to potential late fees, etc

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

#12

Post by brundolf »

yellow_lead wrote: post #11
brundolf wrote: post #8

Earlier quoted context omitted.

Weird. Why would they do that?

They make that extra X% on the loan. For a 30k car at 3% that's nearly 1k. Also, the loan could be worth more due to potential late fees, etc

The first part isn't really helpful to me though- if the APR is 3% I'll just factor that into the price up front and then any "deal" they give me will be (theoretically) the same as or worse than paying up front. Unless I take the loan deal and then immediately pay it off, I guess

The second part might make sense if they're "betting" on getting late fees from me while I know there won't be any

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

#13

Post by silexia »

jqpabc123 wrote: post #10

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.

There's a critical piece missing to the above comment: who can predict the returns in the future from investments? The investing market is massively inflated currently, what if it crashes? Remember the person giving you a loan is making money on it as an investment of their own. They have all the same options you do (and often way more knowledge of investments), but they do this anyways.

I would recommend avoiding an auto loan if you can.

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

#14

Post by mort1merp0 »

yuppie_scum wrote: post #9
rolph wrote: post #6

Earlier quoted context omitted.

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.

I believe that any movement of $10,000 or more is automatically reported to the Feds. A systematic movement of say $9,000 multiple times to avoid that would be viewed as structuring and you might draw their attention as well.

--edit (a word)--

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

#15

Post by iab »

brundolf wrote: post #4
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)

Not always available for every model, and obv. credit-score has to be pretty good. good luck!

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

#16

Post by rolph »

yuppie_scum wrote: post #9
rolph wrote: post #6

Earlier quoted context omitted.

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.

the IRS would find out when the seller reports the sales income, unless the seller is truly crooked and cooks thier books up in some way, such as fees to a consultant who died in a house fire thus all his records are burned and gone.

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

#17

Post by spfzero »

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

It’s not really a zero percent loan. To test that, tell the dealer you are paying cash, make your best deal, and then at the last minute say you changed your mind and want a zero percent loan for the same price. See how that goes.

The money that goes to purchase your car, is invested money that earns a non-zero return, whoever it comes from. If you have the cash, you be that investor, and you earn the return.

The manufacturer, and the dealer, have a bunch of dials they can twist to get the most money out of you while convincing you that you are getting a good deal. It’s win-win, except you don’t actually win. Paying cash takes the dials away.

They do this dozens of times a day, every day, and they don’t play to lose money. You’re not going to beat them.

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

#18

Post by jqpabc123 »

silexia wrote: post #13
jqpabc123 wrote: post #10

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.

There's a critical piece missing to the above comment: who can predict the returns in the future from investments? The investing market is massively inflated currently, what if it crashes? Remember the person giving you a loan is making money on it as an investment of their own. They have all the same options you do (and often way more knowledge of investments), but they do this anyways. I would recommend avoiding an…

...who can predict the returns in the future from investments?

Low risk investments are available. For example, high quality corporate bonds.

But there's a critical piece missing to the above comment: who can predict the value of the car in the future? Cars are a depreciating asset with significant value losses and other associated costs.

Thus paying cash for one involves risk too. Assume a 10-20% loss almost immediately. And if the owner should die in the near future, the need for the car will be negated and significant additional cash value may be lost for his estate/heirs.

The point being --- anything is possible either way. Risk is ever present and requires a personal judgment.

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

#19

Post by yongjik »

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

Huh? Am I weird to assume that "buy with cash" is a metaphor and of course anyone buying a car from a dealer would write a check or whip out their phone and do online transaction?

Do people actually show up with a briefcase of $100 bills like in movies?

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

#20

Post by brundolf »

yongjik wrote: post #19
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

Huh? Am I weird to assume that "buy with cash" is a metaphor and of course anyone buying a car from a dealer would write a check or whip out their phone and do online transaction? Do people actually show up with a briefcase of $100 bills like in movies?

I did mean "cash" in the abstract sense, in case anybody was in fact confused by that
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