me2happy

Now I have always heard that one should never pay a car in full. Even though I have always heard this, my teacher who is a CPA has always paid for everything in full. He paid his house cash and he paid his car in cash. My point is that, it is not really unwise to pay for a car in cash. My teacher is a very intelligent individual and he has no problem paying cash. My conclusion is that it is not really a big deal if you pay for a car in cash. If a cpa does not really have a problem paying for expensive things in full than why should I.
What do you guys think?

yayankee

It's all about the cost of money. Can you get a better return on the cash you would use to buy the car?than the interest rate on the auto loan? If so, DO NOT pay cash. Just my opinion. CPA's are usually very conservative. What car does he/she drive a Volvo?

me2happy

yes, he is conservative! He drives a TOYOTA camry. It is rumored that he has plenty of money but he always tells us that he does not.

enelrojo

If you have confidence in your CPA, follow his advice. He knows your financial situation, no one on this board does.

ressla

As previously stated ,it's about using the "cheapest" money you can. The cash you already have is the cheapest you can get and this is why many accountants and advisors recommended you pay cash if you can.

Occasionally taking out a loan is sensible if a very good rate is available, with good terms. Especially if you may require access to your main funds quickly in the future.

In many countries leasing is the most cost effective option.If done right, you effectively are just paying for the depreciation
without putting down a huge deposit.

swajames

I agree with you, but it's not always strictly true that your own cash can be cheapest. Over in the US, BMWFS often has finance rates that are appreciably lower than even reasonably conservative investment returns. It can work out cheaper to finance the car even if you were otherwise going to pay in full. Example - with subvented leases or factory backed finance it's pretty easy to borrow money at 2 to 3% but achieve 5 or 6% with the cash somewhere else (though in fairness the investment returns are taxed, thus reducing the effective benefit). So, BMW's cash can be the cheapest. Then again, I do agree that paying with your own and not having to worry about car payments and having title to the car is probably a better return on the investment than a making a margin of a few basis points here and there.

daydok

for me, at the end of the day, the real question is, are you comfortable with paying for it all up-front.
if you're planning on keeping the car for a long time, and the $$$ won't affect your day-to-day living situation, then why not pay for it all?

HPIA4v2

The best reasoning thus far.

My 2 cents, if you have the cash in lump sum, why not just pay it all. Assuming:
1) you are driving out of the typical lease, either too little or too much mileage.
2) Since you ask about money, the best way is to keep car for along time once it paid off. I assume you are not changing car every 3-4 years
3) I consider this as a toy, why finance a toy? A car for transportation is Kia which will take you from point A to B safely (no punt inteneded at all )

iversonm

I did this analysis for myself. I like to keep my cars about three years, and my driving habits fit well with a lease.

However, I questioned whether I was making the correct financial decision.

I computed the total cost of the car both with and without the time value of money. I looked at cash, a three year loan, a 5 year loan, and a lease. I assumed equal residual values after three years for all scenarios, and identical interest rates (arond 6.25%).

Without cost of money, leasing faired poorly, and was insignificantly cheaper than a 5 year loan. paying cash was obviously cheapest.

However, If I assumed as little as 5.5% return on the cash that would be used to buy the car, leasing proved to be almost as cost effective as a cash purchase, and superior to either loan option.

IMO, it was a very worthwhile exercise.
I'd suggest that you do some careful analysis of your own before you act.

Thirdy

i guess it would be better if you ask that question in a "financial" type forum.