Weird about Spending

[AccountantSalary]

I'm definitely into paying cash. I'd rather save up for a large purchase than deal with monthly payments and interest. Saved and paid the full amount for a new car. You may want to point out the total cost of financing the car, and what you could do with that extra money if you paid cash.

[greenskeeper]

Just wondering where you are getting a used car loan at 1 or 2 percent?

[disneysteve]

You may want to point out the total cost of financing the car, and what you could do with that extra money if you paid cash.

True, but in this case, OP may not be talking about much money. Financing $5,000 at 1% for a year is going to cost about $50. Hardly a windfall. Again, paying cash is clearly the mathematically correct answer but if paying it out over a year lets him sleep better at night, that might be worth $50 to him.

I would run the numbers anyway just to illustrate the advantage of paying cash. Plus, there is the reduced hassle of not having to apply for a loan or do any of the related paperwork and there is no monthly payment to keep track of.

[kv968]

Just wondering where you are getting a used car loan at 1 or 2 percent?

I guess I can add another "oops" to not putting more money down on the car...

Who said it was USED?

[YLTL_Dan]

Could your husband be... the dreaded Hoarder?? I can feel for him, because I love having cash in the bank. However, as many have already pointed out, if you're financially able (full emergency fund) to buy your new/used car with cash, you should.

[josetann]

Who said it was USED?

Post #1 said the amount financed was $5-$10k...so either they're putting a lot down on a new car and just financing part, or they're looking at a used car. But post #7 says it's used, so there you go

And I agree with those who say either way may be the correct answer. I look at it without emotion first, and clearly the numbers (assuming you would still have decent savings after the car purchase) favor paying for the car in cash. Few assumptions made, such as you want to keep the cash liquid (so it'll be hard to match 1-2% in interest). BUT...once I see what's best ON PAPER, then I let the emotion in. And if we're talking $50 or so to feel much more financially secure, reduce stress, etc., then I think that's the best course to take. It's called PERSONAL finance for a reason...it's personal. What's best for you may not be best for the next guy.

So...I'd simply run all the numbers and see just EXACTLY how much this loan is costing (are there fees over and above the interest, fees for paying off early, etc.?). Show them to your partner. Explain that it's going to cost $XX over a year (or two, or whatever) to have the car financed (I'd go so far as to figure how much that cash could earn in a savings account, which will be peanuts but still). Then see if you two can compromise. Maybe he wants to finance $10k, you want to pay it all in cash, so you agree to finance $5k and pay it off within a year?

[JoeP]

We look at it this way:
If we lose an income stream, will things be tighter having monthly car payments? YES
Do we want to pay even more (P+I) for a car than it is worth? NO
Do we want a clear title when I take possession? YES
Do we want to be able to liquidate the vehicle at any time and get its full value? YES

We will never have another car loan, and will keep our cars on the road as long as possible.