Today, many people buy cars (and other item) by taking out a loan. I feel that this is a mistake. That is, in normal circumstances, if you cannot pay cash for your car then you should not buy a car. I am tempted to say that is true for (personal) real estate also. Am I being realistic?
By the way, I current rent and I have hopes of buying my first home for cash.
Cars depreciate in value and it does not make sense to get a car loan for a car. I think with proper investments, one can buy their home with cash. It all depends on the type of car and loan they are offering. Some dealers are offering not interest or low interest loans which can be a good deal. I purchased a car in January with no interest for three years. Why give the car company your cash if you can pay a monthly amount with no interest.
My general experience is that when I talk to car dealers about their interest free financing (or very low rate financing) it normally comes with some kind of catch like you do not get the manufactory’s rebate. So in effect, you are paying the interest for the car loan by losing your rebate. Therefore, I believe that the best way to buy a car is to pay cash. I also believe that for most people, leasing turns out to be an expensive (wrong) choice.
Because a paid for car cannot be repossessed for non-payment. Because in some cases, you can get lower insurance if you own it and not the bank. Because you can take then take what you would have paid in monthly payments and start investing, save for your next car, etc. Because you can often get a better deal from some dealers if you pay with cold hard cash. Because debt is a 4-letter word. You are on the right track Bob! I wish I knew 30 years ago what I know now.
To me, the reason to pay cash for my cars is that I cannot earn (after taxes) a rate of return on my money greater than the rate I am charged for borrowing the money. If I could deduct the interest on a car loan, and rate was reasonable, I would seriously think about buying my next car on time. I consider a 5% rate reasonable. I do not consider a 8% rate reasonable at this time.
From what i have read from financial advisers, you would be realistic in stating it is preferable to buy a car in cash, but not realistic in stating to do the same with a residence. the two have very different costs. buying a house is considered an investment. what you should do is be realistic in the residence you buy and not go way over what you can realistically afford. There is not catch with a no interest loan. Who ever informed you no manufactures’ s rebate is incorrect. I purchased a Mazda 6 received the rebates and no interest for three years. The money I would have paid cash for the car is earning interest in a three years CD.