+ Charlie Posted January 20, 2023 Share Posted January 20, 2023 (edited) A couple of weeks ago I bought a new car. Given the current interest rates on loans, I decided to pay cash, since the annual RMD from my IRA had just been deposited in my checking account, and I didn't need the money. It's too late to reconsider now, but I wonder what your opinions are on having done that? Edited January 20, 2023 by Charlie cotetowemixx 1 Link to comment Share on other sites More sharing options...
+ overeasy Posted January 20, 2023 Share Posted January 20, 2023 (edited) Charlie - Traditional economic view would probably support your decision....holds that if you would be paying more in interest than you could recognize in earnings from those funds, it makes economic sense to forego the debt....going back to my econ class days....Not to mention that you didn't go through the loan application process followed by the need to make the scheduled payments on an ongoing basis... Edited January 20, 2023 by overeasy TorontoDrew, thomas, Kevin Slater and 1 other 3 1 Link to comment Share on other sites More sharing options...
+ augustus Posted January 20, 2023 Share Posted January 20, 2023 52 minutes ago, Charlie said: A couple of weeks ago I bought a new car. Given the current interest rates on loans, I decided to pay cash, since the annual RMD from my IRA had just been deposited in my checking account, and I didn't need the money. It's too late to reconsider now, but I wonder what your opinions are on having done that? Depends on the interest rate you would have paid. Some car companies are still offering 0.9% interest through their finance arm. But it's certainly up to you if, for example, you don't want to be bothered with monthly payments. Kevin Slater, + Charlie and thomas 3 Link to comment Share on other sites More sharing options...
+ Charlie Posted January 20, 2023 Author Share Posted January 20, 2023 1 hour ago, overeasy said: Charlie - Traditional economic view would probably support your decision....holds that if you would be paying more in interest than you could recognize in earnings from those funds, it makes economic sense to forego the debt....going back to my econ class days....Not to mention that you didn't go through the loan application process followed by the need to make the scheduled payments on an ongoing basis... That was the traditional economic theory that I was working on. + Pensant 1 Link to comment Share on other sites More sharing options...
+ Lucky Posted January 20, 2023 Share Posted January 20, 2023 Cash is king. + Charlie and + Vegas_Millennial 1 1 Link to comment Share on other sites More sharing options...
misterhumphries Posted January 20, 2023 Share Posted January 20, 2023 Congratulations! By paying cash, as others have stated, you save several thousand in interest. Even though a car is a depreciating asset, you'd not be enslaved to years of finance charges. + Charlie 1 Link to comment Share on other sites More sharing options...
BeamerBikes Posted January 20, 2023 Share Posted January 20, 2023 Don't look back! Enjoy the new car AND more importantly enjoy no car payment! I don't subscribe the idea of cheap money loans on a depreciating asset. Oh but cash flow, capital preservation, etc. When it comes to personal finance, it's much ado about nothing. Car payment = another bill I have to pay and paying interest to a bank on top what I paid for the car. On top of that you used an RMD, which tells me you are fortunate enough to be required/forced to pull from accounts. Just another reason to buy the car outright. My advice would be different if you voluntarily pulled the last of your emergency fund to buy the car outright. That's not the case here. + Charlie, EZEtoGRU and + Vegas_Millennial 3 Link to comment Share on other sites More sharing options...
+ bashful Posted January 21, 2023 Share Posted January 21, 2023 Happy Motoring. I've paid cash for three of my last five cars. The other's I paid off early simply because I got tired of the payments., Life is simple with no car payment, or mortgage. thomas, + Pensant, + Charlie and 4 others 6 1 Link to comment Share on other sites More sharing options...
Guest Posted January 21, 2023 Share Posted January 21, 2023 You did the right thing. If you have the cash, your guaranteed return on it is the interest you’ve saved. If one must have a car and doesn’t have the cash, then who’s to judge borrowing. If one must have a car, doesn’t have cash, and borrows to get more car then they need, then I suspect they’ll never accumulate wealth unless they’re lucky. Best thing I ever did when I was young was driving my cars until the wheels fell off…even when my friends were “buying” big new beemers Link to comment Share on other sites More sharing options...
handiacefailure Posted January 21, 2023 Share Posted January 21, 2023 I'd pay cash if you have it since a car is a depreciating asset. Sometimes you can get a good interest rate that is less than a savings account rate but you need to factor in if there are any loan fees and a lot of times you forfeit rebates which can more than make up for the interest. + Charlie, + bashful and thomas 3 Link to comment Share on other sites More sharing options...
handiacefailure Posted January 21, 2023 Share Posted January 21, 2023 22 hours ago, augustus said: Depends on the interest rate you would have paid. Some car companies are still offering 0.9% interest through their finance arm. But it's certainly up to you if, for example, you don't want to be bothered with monthly payments. Problem with those low interest rates is a lot of times you give up the rebates. When I bought my car a couple years ago they had a pretty cheap interest rate but it meant giving up the rebate. + bashful and + Charlie 2 Link to comment Share on other sites More sharing options...
+ BenjaminNicholas Posted January 22, 2023 Share Posted January 22, 2023 Cars, whether leasing or financing, is a rough go at the moment. As others have said, if you have the cash to pay in full, that's the way to go right now. I just bought out my lease because the car has incredibly low mileage and the calculated residual now gives me a huge amount of equity. That's rare for a lease. + Pensant, + bashful, TorontoDrew and 1 other 4 Link to comment Share on other sites More sharing options...
John Doe II Posted March 8, 2023 Share Posted March 8, 2023 Is leasing worth doing right now over financing if you can’t pash cash? Link to comment Share on other sites More sharing options...
+ BenjaminNicholas Posted March 8, 2023 Share Posted March 8, 2023 2 hours ago, John Doe II said: Is leasing worth doing right now over financing if you can’t pash cash? Money factor on leases is not great at the moment. The deals they run in the papers and television commercials are usually the stripped down models with a decent amount of cash down. They have 1 or 2 of them on the lot, so actually getting that deal is next to impossible. Your best bet is to take advantage of the falling prices on the used-car market. The major issues with Carvana are soon going to flood the market with a ton of used vehicles, driving down prices. + Pensant 1 Link to comment Share on other sites More sharing options...
+ DERRIK Posted March 8, 2023 Share Posted March 8, 2023 I leased a Buick 3 1/2 years ago GM got burned for $5k they failed to accurately predict the value of my car + Pensant and + BenjaminNicholas 2 Link to comment Share on other sites More sharing options...
+ BenjaminNicholas Posted March 8, 2023 Share Posted March 8, 2023 (edited) 3 hours ago, DERRIK said: I leased a Buick 3 1/2 years ago GM got burned for $5k they failed to accurately predict the value of my car To this, I say nicely done sir 👍 If you leased pre-COVID, the industry seriously undervalued where the future of the used car market would be. That said, used car values are beginning to stabilize with black/blue book values normalizing. As the industry is able to get allocations and availability in order, used cars become less important as they once were. The vehicle I just got rid of kept its value very well, leading me to one-pay this next lease along with the dealership cutting me a check for the remainder. All said, if you're in a lease and you have equity in that car, the time is now to roll-out into something new (using that equity to your advantage) or simply buy out the lease and walk away ahead. Edited March 8, 2023 by BenjaminNicholas Link to comment Share on other sites More sharing options...
+ Vegas_Millennial Posted March 10, 2023 Share Posted March 10, 2023 On 1/20/2023 at 11:29 AM, Charlie said: That was the traditional economic theory that I was working on. Agree 💯 100% of car repossessions occur on cars with a monthly payment. 100% of bank foreclosures occur on homes with a mortgage. It's better to have low recurring expenses than to try to earn more to pay more. Link to comment Share on other sites More sharing options...
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