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Old 05-04-2019, 01:44 AM   #41
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The decision to finance or pay cash is part math problem, part psychology. Just like whether or not to carry a mortgage when you can afford to pay it off. DW and I are in the "no debt" camp, partly because it just feels good to not owe anybody anything.
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Old 05-04-2019, 06:10 AM   #42
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cash. and run all of the numbers ref a lease. you
may find it more expensive overall to lease. write a check and be done with it.
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Old 05-04-2019, 06:35 AM   #43
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I recently purchased a new vehicle. I could have easily sold some mutual fund shares and paid cash. I realized that would trigger some LTCG tax and even more state income tax. I'd need to sell at least 20% more than the vehicle purchase price.


Instead I financed it, 100%, and make monthly payments from my regular income sources.


Looking back (with the complete benefit of hindsight) the mutual funds have increased in value 15% since last July when I would have sold....


As long as interest rates are this low, I will borrow as much as I can and budget the monthly payments.


I remember when you could get a better deal if you went to the dealer with cash. No more. One dealer told me "if someone came in to buy a car with cash, my office wouldn't know how to do the paperwork, they've never done it before"
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Old 05-04-2019, 06:36 AM   #44
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I would only finance if the interest rate is quite a bit less than what savings accounts are paying. Today, that would have to be under 1%.

I despise debt, but did take a 3 year 0% auto loan in 2016.
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Old 05-04-2019, 06:40 AM   #45
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cash. and run all of the numbers ref a lease. you
may find it more expensive overall to lease. write a check and be done with it.
A lease is good if like us we want at least 1 new car every 3 years, as the car depreciates anyway. If one want to keep their car till the year dot, then it is not.
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Old 05-04-2019, 08:15 AM   #46
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If you would like to raise your FICO score, a new loan and successful repayment could give you a nice boost. Depends though, lots of other things to factor in. Generally only applies to those who have a good score now, but one that is not moving due to no action for long periods at a time.
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Old 05-04-2019, 10:16 AM   #47
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My car philosophy is to buy what I want including options, pay cash, and keep it a long (> 10 yrs) time. Haven’t had a car loan since the mid 90’s.
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Old 05-04-2019, 12:02 PM   #48
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I would only finance if the interest rate is quite a bit less than what savings accounts are paying. Today, that would have to be under 1%.

I despise debt, but did take a 3 year 0% auto loan in 2016.
Well, if I had cash that I was going to keep in a savings account then I would agree with that.

When we took a car loan (with a large down payment) though we had two choices:

1. Spend cash that was actually earmarked for something else (i.e. if we spent the cash for the car then we would have to IRA withdraw for the something else).

or

2. Withdraw money from the IRA that was invested and then pay taxes on the withdrawal. Didn't make much sense to us to do that.
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Old 05-04-2019, 12:06 PM   #49
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Well, if I had cash that I was going to keep in a savings account then I would agree with that.

When we took a car loan (with a large down payment) though we had two choices:

1. Spend cash that was actually earmarked for something else (i.e. if we spent the cash for the car then we would have to IRA withdraw for the something else).

or

2. Withdraw money from the IRA that was invested and then pay taxes on the withdrawal. Didn't make much sense to us to do that.
Where was the money to make the car payment coming from?

I guess if you are mainly living off annuity type money and have no plans to tap the IRA then I see it.

Otherwise it seems like a question of tax bracket.
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Old 05-04-2019, 12:19 PM   #50
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I remember when you could get a better deal if you went to the dealer with cash. No more. One dealer told me "if someone came in to buy a car with cash, my office wouldn't know how to do the paperwork, they've never done it before"

Under most circumstances, the dealer hopes to make some money by directing the buyer to in-house financing. When shopping for a car, if I intend to pay cash, I keep that to myself until we've come to an agreement on price, etc.

Frequently, dealers offer low-rate financing sponsored by the manufacturers (to sell cars). We used that to buy a new Honda CR-V a few years ago--I think it was 0.9%, and a better option for us than the alternative Honda rebate and taking the tax hit of selling investments to pay cash.
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Old 05-04-2019, 12:25 PM   #51
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Where was the money to make the car payment coming from?

I guess if you are mainly living off annuity type money and have no plans to tap the IRA then I see it.

Otherwise it seems like a question of tax bracket.
A lot of our income is social security. We withdraw from the IRA for the difference between SS and spending.

It is partly a matter of tax bracket. But it is also a matter of SS taxability. This year, if we withdrew the cash to pay the car loan then 85% of our social security (the max under the law) would be taxable. If we just make payments on the loan this year, less of our SS is taxable (a lot less of it) and the tax bracket is lower. I have projected this out over the car loan and we save more money paying the loan out over time even with the interest than we would by taking out a large lump sum and vastly increasing the amount of taxes we pay.

It is possible things will change. For example, if we needed to withdraw enough any way that all of our SS was going to be taxable and we moved into a tax bracket where paying off the loan would not change the bracket then we might pay it off earlier.
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Old 05-04-2019, 03:33 PM   #52
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I hate car payments. I was often saddled with them when I was younger and had no capital. When I got older and had the capital I always paid cash.
However, I've come to the conclusion that just because I can, does not mean it's the best move.
My plan, going forward, is probably to lease. I won't have to tie up as much cash, and I am less at risk from buying a car with a fundamental mechanical issue, or a car that gets cracked up in a wreck. With CarFax, now, if you have that happen, you can take a big hit at resale time.
YMMV
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Old 05-05-2019, 03:11 PM   #53
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I'm not as savvy a negotiator as many are on this forum...
We've been in the market for an SUV the last couple of months. Currently driving a 2000 Subaru Impreza wagon (113,000 miles on it) and the wife drives a 2014 Outback. But our sons (high schooler and university student) are needing the use of a car more and more. We tend to hang on to our cars, so no leasing.
DW spotted a Subaru Ascent several months ago and had her heart set on one. Turns out I had to make a plane trip to visit my ailing mother two weeks ago. My older brother lives near her and he just bought an Ascent; so I got a free no-pressure test drive! Turns out I loved the vehicle.
Previous to my trip I had been emailing with the local Subaru dealership where we had bought the Outback. They were good on responding and gave me some ballpark numbers on a new Ascent (Premium trim level). When we bought the Outback there in 2014, it was with a no-haggle discount coupon price from a professional organization I am a member of. Easy-peasy transaction.
So yesterday we went to the dealer (I did have a coupon for a $50 gift card for just test driving the Ascent). We knew the exact color and trim level we wanted and did my best to get ready for the price negotiation. After we agreed on purchasing from them I started the negotiation price lower than the max price I had in my head...The young sales rep said, "Oh, I'm so sorry, we changed to no-haggle pricing back in 2008." LOL. Their no-haggle price was already at the low end of KBB, so I knew it was fine, and had a laugh.

Of course, the real "sales" part comes from the finance guy! Listened to the finance guy vomit out his long-rehearsed spiel on warranty packages...sent him away to huddle with my wife...he came back and we declined them all. This was then a new lesson for me: he THEN offered what I thought was a reasonable bumper-to-bumper warranty extension (8 years total) for not a lot of money. Since the Ascent is a first year model and is turbocharged, I bit on the warranty.
In the end we put down $10000, and will finance the rest, giving ourselves the option of paying it off early (did the same with the Outback; paid it off in a year). There were no deals or incentives on interest rates, which ended up at 3.49%. But I HATE car negotiations and like this dealer after many interactions with with them, so I just thought, what the hey, I have bigger battles to fight. While we have the money to pay cash, the money is sitting in a 2.10% savings account and I just want the big pile of cash in the bank to stay big; for unforeseen emergencies.
We take delivery on our new Ascent this Wednesday or Thursday.
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Old 05-05-2019, 03:25 PM   #54
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We take delivery on our new Ascent this Wednesday or Thursday.
Congratulations! And thanks for the honest (and frankly fascinating!) story of what you went through in buying your Ascent. At some point in the next year or two I want to buy a new SUV also, and I have heard good things about the Ascent elsewhere. I'll check it out online and see if it is one that I may want to test drive.
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Old 05-05-2019, 05:16 PM   #55
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Under most circumstances, the dealer hopes to make some money by directing the buyer to in-house financing. When shopping for a car, if I intend to pay cash, I keep that to myself until we've come to an agreement on price, etc.
Yup. They may ask me how I intend to pay for the vehicle, but I remain thoroughly noncommittal until and unless I'm ready to buy. At that point, after agreeing on price, then we can discuss payment/financing options.
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Old 05-05-2019, 06:13 PM   #56
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Yup. They may ask me how I intend to pay for the vehicle, but I remain thoroughly noncommittal until and unless I'm ready to buy. At that point, after agreeing on price, then we can discuss payment/financing options.
If there's additional cash incentive for financing you are shooting yourself in the foot. Better answer would be whichever gives me the best price.
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Old 05-05-2019, 06:22 PM   #57
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Congratulations! And thanks for the honest (and frankly fascinating!) story of what you went through in buying your Ascent. At some point in the next year or two I want to buy a new SUV also, and I have heard good things about the Ascent elsewhere. I'll check it out online and see if it is one that I may want to test drive.
When we bought our last SUV (6 months ago) I did something I had never done before but it has worked out. We test drove several different vehicles but were interested in the new small Volvo SUV. It was in very short supply so there were no deals to be had. But there is a very large Volvo dealer in this area who had a bunch of XC60s. I was surprised that many of them were shown on the website as being loaner vehicles. It was just starting the 2019 model year but they had a bunch of 2018 and basically the XC60 didn't change between the two years in any substantial way. We ended up saving a lot of money buying a "loaner" with about 3k miles on it (it had been driven by and employee for much of the loaner period). Anyway, this dealer is one that still gives you a loaner car when you bring the car in for service and they just basically take something on the lot and loan it out. They gave us an extended warranty and so far it has worked out great. The next time I buy a car this is an angle I will definitely look at. It might not have worked had there been substantial differences in the model year, but with no big changes it has worked out well.

We ended up putting down a large down payment and did get new car financing for the rest of it.
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Old 05-05-2019, 06:27 PM   #58
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If there's additional cash incentive for financing you are shooting yourself in the foot. Better answer would be whichever gives me the best price.
These things can almost always be researched ahead of time.
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Old 05-05-2019, 06:58 PM   #59
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If there's additional cash incentive for financing you are shooting yourself in the foot. Better answer would be whichever gives me the best price.
It seems logical to first nail down the price. Then you can know if any "additional cash incentive" is really "additional."
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Old 05-05-2019, 08:27 PM   #60
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When we bought our last SUV (6 months ago) I did something I had never done before but it has worked out. We test drove several different vehicles but were interested in the new small Volvo SUV. It was in very short supply so there were no deals to be had. But there is a very large Volvo dealer in this area who had a bunch of XC60s. I was surprised that many of them were shown on the website as being loaner vehicles. It was just starting the 2019 model year but they had a bunch of 2018 and basically the XC60 didn't change between the two years in any substantial way. We ended up saving a lot of money buying a "loaner" with about 3k miles on it (it had been driven by and employee for much of the loaner period). Anyway, this dealer is one that still gives you a loaner car when you bring the car in for service and they just basically take something on the lot and loan it out. They gave us an extended warranty and so far it has worked out great. The next time I buy a car this is an angle I will definitely look at. It might not have worked had there been substantial differences in the model year, but with no big changes it has worked out well.

We ended up putting down a large down payment and did get new car financing for the rest of it.
What good fortune! Also, since they give out loaners when you bring in the car for service, you know that you always have that service available there, too. That's pretty cool.
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