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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?

#31

Buy used and pay cash. Usually loans are expensive in terms of interest and additional charges. Also, people tend to buy a more expensive car than they need since the payments seem affordable. Lastly, your time has value. The time used to make the monthly payments is time best used on something else. I argue that even a minute of Netflix is a better use of your time.

This is the correct answer. I have done it all over the years and nothing beats buying a used car and paying cash for it. Don't let people tell you that oh you can make more money in interest outside blah blah. They forget to tell you that what if you need to sell the car quickly for any reason, then what ? You could end up being under water comapred to the loan. If you finance a car, you are paying a lot of interest…

> 2. Get a mechanic to check it for like $100/$150.

How do you find a mechanic that won't rip you off to do this?

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

#32

Earlier quoted context omitted.

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

There's nothing stopping you from buying it with financing, and then immediately paying it off before you incur too many interest charges. My parents do that with every car purchase. It makes the deal making process and all negotiations way smoother, while ensuring they don't incur any unwanted debt.

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

#33
I once bought a VW and intended to pay cash. After the price had been fully negotiated, the salesman said he had done me favors on pricing and asked that I do him a favor by financing, which helped him. He asked that I keep the loan outstanding for at least 2 months so he would get credit for the origination. I agreed to do so only on the condition that they reduce the price of the vehicle by the amount of interest I would have to pay during those 2 months (I think it was around $250).

But it was all for naught; the car ended up being a lemon and VW of America bought it back from me soon thereafter.

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

#34
It is important to make the obvious note that a loan means somebody is renting you money and charging for it. It will always be bad. Now about buying a car.

The best financial decision is to not have a car, it only generates expenses and usually are high cost to maintain, as you need insurance, maintenance and so on. As public transport isn't available everywhere, let's go on with the list...

The second best decisionis to buy a used car and pay with cash, not getting a loan.

The third of buying a cheap used car and getting a loan.

The 4th is buying a new car without a loan.

And the worse being buying a car you can't really afford, brand new with a loan.

The value of the purchase value of the car is pointless. What matters is how long you intend to stay with it, because when you do. You can factor in insurance + maintenance + depreciation and divide it to understand how much you will spend per month(This is how companies do accounting, you should as well do for yourself!). A lot of cars you lose at least $1K per month. You want to reduce this value as much as you can. Get a car that gives you just enough comfort, has a good reputation of not breaking down and doesn't consume a lot of fuel.

Just imagine instead if you had that $1k per month for yourself, invested it and perhaps was lending it to a clueless person to buy their own car. This is wealth :-)

As you can see, buying a new car is a bad idea. Sometimes it is even better to get a loan to buy a used car. A lot of used cars are sold very cheapily after 2 years and most of its value is lost. A used car has actually a better resale value than a new car, supposing when you bought it it was used.

So even if you end up buying some crooked car with real issues despite being only 2 years old(uncommon), you can always resell and buy another 2 years old used car.

If you really like cars and driving... and want to drive expensive cars, it is likely cheaper to rent them, drive it for a while and return it. You even get to experience different cars.

Brand new cars is for emotional buys, people who don't really grasp economics or are just too rich to care about it. Are you any of those options?

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

#35

Earlier quoted context omitted.

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

There's nothing stopping you from buying it with financing, and then immediately paying it off before you incur too many interest charges. My parents do that with every car purchase. It makes the deal making process and all negotiations way smoother, while ensuring they don't incur any unwanted debt.

The last time I bought a new car with a loan, which was in 1993, the interest was pre-computed. I tried to pay it off early, but I wouldn't save any money on interest. I don't think they do that anymore, but read the fine print.

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

#36
post #31

Earlier quoted context omitted.

This is the correct answer. I have done it all over the years and nothing beats buying a used car and paying cash for it. Don't let people tell you that oh you can make more money in interest outside blah blah. They forget to tell you that what if you need to sell the car quickly for any reason, then what ? You could end up being under water comapred to the loan. If you finance a car, you are paying a lot of interest…

> 2. Get a mechanic to check it for like $100/$150. How do you find a mechanic that won't rip you off to do this?

join a local facebook group for your area and ask around. Usually someone will give you a referral.

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

#37
post #4
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)

Yes, but sometimes the low interest rate financing is in lieu of rebates or discounts. You have to run the numbers both ways. Sometimes it is cheaper to pay the higher interest rate, and take the discounts and rebates.

Before going to the dealer, I recommend check with your local credit unions, and getting approved for a loan. They usually have pretty low rates. If the dealer can beat that rate, go with the dealers financing, otherwise use your credit union financing.

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