Smart to pay cash for late model car?

[starnz]

Hello all, I am trying to decide the best way to purchase a "new" car and figured no better place to ask then here!

The basics are simple: I have every intention on paying cash for the vehicle, with a max of $16k. I am currently saving(about $5k saved) and will look to buy next spring/summer. In getting a minivan for my wife, I have already begun researching the year, model, and what they are going for. The money I have saved is being held in an ING acct getting 1.1% interest.

My questions are: Is there a better place to park the cash until the time comes to purchase? Is paying cash even the best financial decision considering a better option is available for housing the money? If you can earn more money on the cash than you pay in financing is the right choice financing? If paying with cash, are there different negotiating strategies/easier to get a better deal?

Thanks for any feedback in advance!

[disneysteve]

To answer your last question first, don't mention that you have the deal in writing. As soon as they know they won't be making a bunch of money off of the financing, that could alter the negotiation not in your favor.

As for where to park the money, the ING account is fine. You need this money in less than a year. You don't want to take any risk with it.

Should you pay cash? Sure. Isn't that why you are saving up for the purchase? Why take on debt that you don't need to take on? If you could get 0% financing, it might be reasonable to hang onto the money but otherwise, I'd pay cash and be done with it.

[JoshuaHeckathorn]

There are other online savings accounts paying a bit more than ING these days, but the difference is so small if wouldn't be worth your time to rate chase. Leave it in ING.

I recommend always buying cars in cash. Work them over when negotiating the price of the van. Then, once you've agreed on a price, enjoy watching their faces cringe as you drop it on them that you'll be paying cash. It's a car salesman's worst nightmare.

[MonkeyMama]

I've generally found that paying cash does not help negotiations. (Nor would getting financing elsewhere. Car dealerships make more if you finance with them).

That said, these times are different. You *may* have more barganing power with cash in hand, these days.

I have financed a car when it helped in negotiations. I paid it off within the week, literally. IT was well worth it to save the money on the final sales price. That was the sole reason that I financed the vehicel (with the dealership). I would do that again, but the only caveat is to read all the fine print. I think most people wouldn't read or understand the fine print well enough to warrant this tactic. The interest was high, but didn't matter since I just paid it off.

Buying a car for the first time with cash, you are probably dreaming of more power. I am giggling to myself because I don't have a lot of positive experiences to share. Car dealerships want to talk you into spending more, and are frustrated when they can't. To the point where they may not even want your business.

As far as where to park the money - keep it where it is. Interest rates suck right now, but you want to keep that money liquid for when it is time to make the purchase. Good luck!

[bjl584]

The only way it wouldn't make sense is if you could get 0% financing, but you aren't going to find that on a used vehicle, so save up and pay cash. Keep your money liquid, the ING account is fine. The only thing that you may want to consider is a short term CD (6 month) if you are sure you won't be buying the car before the CD matures.

[littleroc02us]

In my opinion it's a risk issue. If you pay for the car in cash you don't have payments or debt. What if you had payments and you were to lose your job, you would have to either take the money out for an emergency or sell the car to pay for it. The bigger question is, "Do you have an EF?" If so, go for it and pay cash. Financing is never a good option, because you end up paying more in interest and increase risk in your own personal life.