Pay cash or go 0%?

[wincrasher]

My truck search is narrowing.

One of my choices is $2000 cash back or 0% financing.

I can pay cash, but 0% is enticing.

In this economy, would you hang onto your cash and take the 0%, or would you just pay the cash, take the discount and be done with it?

We are talking $26k-$28k.

FWIW, EF and savings are no worry.

[kork13]

Some would (will) argue that it's better not to take on any debt if you can prevent it, which in this case obviously you can. However, I'd say that 0% can be smart. Drag it out, and meanwhile stash/invest the cash to make interest/dividends off of it.

The only factor here is the either/or scenario. You need to do the math and figure out if you'll do better to have $2000 cash now, or if you can reasonably expect to make more than that in interest/dividends with the$26k over the next 3-5 years. Just a quick WAG on an interest calculator I've got, with a 2% rate, you'd make ~$2730 on $26k over 5 years. So it seems that taking the 0% is smart for you.

[zetta]

Think about it this way -- you're paying $2k extra to spread the payments over 3 years. I plugged the numbers into a what's missing calculator, and this is equivalnt to a 4.8% interest rate. (Or 2.95% over 5 years.) Take the cash back.

[Joan.of.the.Arch]

Can you negotiate the same price either way?

[disneysteve]

Think about it this way -- you're paying $2k extra to spread the payments over 3 years. I plugged the numbers into a what's missing calculator, and this is equivalnt to a 4.8% interest rate. (Or 2.95% over 5 years.) Take the cash back.

Exactly what I was going to say. The cash back is the better deal.

Can you negotiate the same price either way?

Nope. This is what lots of people fail to understand. 0% financing is NOT free. It gets worked into the price one way or another.

[wincrasher]

From my research on Edmunds,

The truck stickers at $30k, people are paying around invoice $28k, then deduct the $2k, so the out the door price is $26k.

[JoshuaHeckathorn]

In the past, I would always just say pay cash for auto purchases and negotiate the cheapest price you can. The 0% deals are there to attract eyeballs and get you in the door.

That said, cash is more king than ever in this economy, and for many people an extra $26K could really come in handy in the event of a job loss or unexpected illness/injury.

You don't seem to be worried at all about your EF, so the cash back deal looks like the right option for you.

[Mike75]

My truck search is narrowing.

One of my choices is $2000 cash back or 0% financing.

I can pay cash, but 0% is enticing.

In this economy, would you hang onto your cash and take the 0%, or would you just pay the cash, take the discount and be done with it?

We are talking $26k-$28k.

FWIW, EF and savings are no worry.

I would definitely take the 0% financing. Shelling out this huge amount at once can make your bank balance too low for a long period of time. I would say, hang on your cash.

[disneysteve]

I would definitely take the 0% financing. Shelling out this huge amount at once can make your bank balance too low for a long period of time. I would say, hang on your cash.

Even if it means paying an extra $2,000 for the car? No thanks. When I go shopping, I want the best price.