Is there any disadvantage at all to paying cash for a car instead of financing?

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Whether or not to pay cash for a car is clearly not as simple a decision as some on this forum would have you believe. It is really dependent on your goals. While leasing my be a good way to drive a new car every 3 years the simple fact is that you are simply renting a car and you never own anything. Likewise although some may be able to finance a car at a low rate and use cash on hand to make some interest in another investment vehicle you should take into account what your return is typically, what you may pay in capital gains and keep in mind that you are financing a depreciating asset. It may still be worth it to finance in some situations. While paying cash may not be the answer for all it may be more practical if you plan to pay cash and drive the car for 10 years. To do this with a used car especially can be beneficial and allow you to put your money towards appreciating assets.

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Paying cash for a new vehicle is one of the most stupid things you can do. New vehicles depreciate 15%-20% the first year and on average 50% after 3 years (average 3-yr lease residual) If you finance at a competitive rate, you will pay some interest, but if you put the money you were going to waste on a new car and buy a CD, you will earn compound interest AND still have your money. Or, as has benn mentioned, apply it to your morgage and save LOTS of money over the course of the term. The very cheapest way to drive a new vehicle is to utilize a good lease. Rjoslin- 30 years auto finance experience

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It depends on what else you would do with the money and if there are any special financing programs.

For example, let's say you are buying a new Chevy Truck for $25,000 with 0% financing. If you have a mortgage on your house that you are paying 6% on, then you should take the 0% financing and put the $25,000 towards your mortgage and you'll guarantee yourself a 6% return on your money. If you have a credit card bill with an even higher rate, you'll save even more.

Be sure that you don't give up a more valuable incentive, like cash-back, in order to get the low/no rate financing. If there is a choice, run the numbers both ways to see which way it works out better.

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It depends. If you're buying a new car, you'll lose a couple of grand to depreciation the minute you drive it off of the lot. That'll really mean something to you if a year or two down the road you want to trade it in for something else and the dealer offers you several thousand less than you've paid for it! If you just don't want a car note, shop for a gently used (2 to 3 year old) model of the car that you want. Someone else has paid the depreciation and you get what you want at a substantial savings.

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I would suggest never pay cash to a dealer unless you know them very well.If they went out of business or something similar you could end up without a title. If you finance the car no money will change hands until they have put the title in your name.Go ahead and finance and then pay it off next month.You will spend a little in interest charges but it is much safer.

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Nebraska law asks that any amount over $9999.99 paid in cash be reported to the IRS.

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A previous poster said paying cash is about the stupidest thing you can do (note that she is in the business of selling car loans). This is untrue. If your credit isn't that great, and you have to finance at greater than 10% interest, you should absolutely pay cash IF you can afford it. Why would you put that money towards your morgage? Your morgage (if you have one) will almost definitely be at a lower interest rate than a car loan. Also, with a home loan, you are borrowing against something that is expected to at least maintain, or most likely increase in value. If you have the option, why would you borrow against a car that decreases in value? Investing is something else you can do with your money if you don't pay cash for the car, but the only way to come out even is if your investments (AFTER TAXES) can give you a greater return than what you're paying in interest. For a car financing of greater than 10%, this is unrealistic. Most conservative investments gain about 10% over the LONG HAUL. There's also always a great risk that you'll lose money in the short term. CDs are a great way to get guaranteed returns on your investment, but rates seldom reach much over 5%, especially for the quantities of money we're talking about.

The reason people with good credit are offered lower interest rates is not only that they're more likely to repay on time, but also that it increases their incentive to do so. If if you have a good credit rating, you most likely are decently well off. With intelligent saving, you can afford to pay cash for a car. If you had the choice to finance at 10% or pay cash, you would definitely pay cash. However, if you're offered financing at say, 6% or less, you're presented with a decision. If decide to invest the $30,000 you were going to pay for the car, you can expect to get a return of about 10% over the long haul with limited risk. If you financed for 6%, then you're 4% (less taxes) ahead. However, you might just take the safe option and pay cash anyway, and not leave anything to chance. It depends on what your financial situation is, what kind of rate you can get, and whether or not you can afford the drop in your cash reserves. As with any important decision, it's important to get several opinions (and to know where those opinions are coming from). If you're still unsure about your personal situation, it's proabably worth it for you to talk to a professional financial advisor. Now might be a good opportunity for you to establish a relationship with one if you don't already have one.

First answer by Jim Carty. Last edit by Socerboy3. Contributor trust: 30 [recommend contributor]. Question popularity: 216 [recommend question]

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