Fuzzo

i purchased it and am paying 670 a month ( i got slapped with a 12% interest because they said that I am credit risk and that I couldn' really afford the car since i pay a high rent etc.) pish posh.. i haven't missed a payment yet

tommy

Purchased (I just wouldn't feel comfortable with renting a car for 3 years, not to mention not being able to do anything to it).

6.15%, 5 yrs, $497/mo w/$6k down, but paying extra to kill the loan in less than 4, so that I'll then be ready to get my next car loan or blow it on lapdances. Haven't figured that one out yet.

mdp c230k

With a high resale value there is no sense in leasing the car. You can sell it when you want and recoup much of what you paid for it. If you lease this money is gone.

hphan

I went with the purchase, $8K down and ~$850/month at 4.5% on a 3 year loan.

SoCal240/6

Wrote a check for the full amount, will drive it for 15 years. The cheapest way to own and drive a car.

Tech

I wrote a check for mine. Aint finna mess w/payments or none of that mess. if you can, write a check and be done with it.

galaxygrrl

Didn't you graduate from High School about 20 years ago? Guess your sense of humor has not matured much :p

Back to the point. Paid cash, car loans are horrible loans but can't always be avoided.

Lynn

I graduated over 30 years ago, and that would be a hard choice. :p Wait a minute, I paid cash and don't have any money left for lap dances.

chronopassion

Paid for the car with cash. I have always had the philosophy that if I cannot write a check for the full amount of something, I do not want it. Note: my house does not apply to that rule!

CP

DtS

Purchased it.

chuckd94

I will purchase it. $1k down, $455 per mo for 6 years (yikes!) I didn't want to lease it, but I can't afford very high payments until I get my big raise in September.

p.s. with this post I am now officially a member

session

not if you include the price of time

the idea that paying one lump sum is cheaper than financing neglects the value of time; the value of having more money at any given time over the loan period.

gotta love economics...

SoCal240/6

Its not that simple. You are neglecting the other side of the equation. True, when you pay cash, that money goes out of your bank account and into the car, and you lose the earning potential of that money.

BUT, when you do that, you also AVOID paying the interest on the car loan.

Assume I have 30K in the bank, earning 3%. I can either leave that money and continue to earn 3% (which, after taxes, is a net return of around 1.5%). But then I have to borrow money to buy a car, paying 6% interest That results in a net loss of money.

Or, I can pay cash. Yes, I lose the 1.5%, but I also don't have to pay 6% on the loan. I come out ahead.

The bottom line is this. Paying cash for a car, and not having a loan, is the equivalent of having a guaranteed 12% investment return (because if I am paying 6% on a car loan, I need to make 12% on my investments - before taxes - just to break even).

There is no investment in the world that will return a GUARANTEED, risk-free 12%. None, not even close.

Anyone's portfolio could always use an investment with a guarnteed, risk free 12% return. Which is why paying cash for a car is the best way to do it.

(Of course, that presumes one has the money available to easily do it. Most people don't have enough to buy even a midlevel car for cash, and still have enough in liquid assets to comfortably do that. I didn't have a lot of money when I was starting out - which is why my first car I bought for $1500.)

Yep - gotta love economics! Using a no-borrow-only-buy-what-you-can-pay-for-now philosophy, I have, at age 36 managed accumulate a nice portfolio, own outright 3 nice cars (1 each from 3 diff German car makers, the "Triple Crown" of German car mfrs!), and will have a $370K house paid off by the end of this year - and have a wife that is a stay at home mom to our 4 year old (i.e. doing it on one income).

No judgments attached to the above - its just facts.

Debt and interest payments make it almost impossible for most Americans to really get ahead - which is why most don't. Unless you have a very, very high income, the only sure way is to live below one's means, and avoid debt and interest payments. Unfortunately, because of marketing, advertising and consumerism, and easy credit, most can't resist living above their means.

columbus

Leasing it for 39 months, 12k miles/year, $345.-/month with $4K down. My previous car I paid cash for and drove it for 10 years; almost got 1/4 of the price when I e-bay'ed it before getting the Benz. Leasing = not the best way to go unless you got a business and can write it off, but I needed lower payments as I'm still paying off my student loan. Next time, I hope to write a check (for an AMG C32 or CLK55, no less ). Ever noticed 'leasing' and 'reaming' have the same number of letters, and share 5 letters in exactly the same position... hmmm

session

very interesting post... nice to talk to someone who appreciates economics =)

SoCal240/6

Actually, that is also somewhat of a myth.

If a business can write off an automobile, it can obtain those tax benefits regardless of how the car is paid for.

If its leased, the lease payments can be written off. But if its purchased for cash, the car becomes a business asset that can be depreciated on the books, thus obtaining the same tax benefits.

(The only difference is that to fully depreciate the car, the business would have to keep it for around 5 years to get the full benefits).

tommy

Don't forget the auto lease inclusion, which negates some tax benefits of leasing.

Also, don't know if many of you know this, but because of 9/11 and lobbying (more the latter, actually), companies can take a 30% direct writeoff against the value of any fixed assets (including cars, I believe) in their tax returns if that property was purchased after 9/11. Of course, that decreases the depreciable value, but you get a current deduction, which is much better, obviously. Also affected NOL carrybacks/carryforwards; very interesting legislation, with very questionable reasoning, i.e., who really benefits (hint: not poor people who were adversely affected by the tragedy).

mdp c230k

I paid cash for my car and am paying myself back as if I was paying back a loan w/ interest. This way it appears that I am making a 12% interest rate on my money after taxes were taken into account. At the end all the money will be back in the bank and interest that would have accrued will not be lost.

SoCal240/6

Clever! (and economically sound, too).

Fuzzo

it takes quite a bit of discipline to do this each month.. i know i wouldn't be able to pay myself back ... i would be thinking what I could add to the car or other ways on spending money.. it definitely is an awesome idea though....

MBNewbii

Im probably unique in this regard, but my employer allows me to set aside up to $10,000/year for various business expenses, including lease payments (but not for purchased vehicles). This allows me to in essence get a 30-50% (depending on tax bracket) reduction in cost.

With the vehicle I just leased, it means I'm only paying $325 month for 48 months. with a 21k buyout, (car was $42,200 sticker/$35000 negotiated), its about a wash if i choose to buy.


but with a lease, i can easily dispose if in an accident, i don't like etc...etc..

but for most people, cash is king

MBnewbii

bagwell

SoCal....3% is the best rate of return you can get on your money...!!!!!!!???? The MINIMUM you should be getting is a guaranteed 6 or 7% via CD. With smart investing 10% is pretty much a sure thing.

Actually 'investing' $35k in a car is one of the worst things to do with your money...its guaranteed to lose value.

Best thing to do is finance it at a low interest rate....

ok ok...that said, I put down $25000 and financed the remainder @ 6% -credit union. I should have kept the cash and invested it wisely !!! or at the least tossed that money into a guaranteed rate CD.

CHECKMATE

I'm pleased with the 320 Wagon choice. Enjoy yours, let me know howgozit and will do the same.

revstriker

Financed mine for 48 months.

Actually, when you look at holding money in an investment, you have to consider the compound interest. So 35K at a yearly rate of 7% would give you a gain of 10,878 over 4 years (with interest paid yearly. Quarterly, or monthly would yield even more). A 35K auto loan at 7% would cost you only 5,230 in interest over the same period. Unless you pay more than 51.9% in taxes, financing the car would be the best way to go.

Silver-Estate

Thanks Checkmate, I most certainly will. BTW: Autoweek did a segment on the Sportwagon yesterday. I"m not sure if this was the first showing, or a repeat. Nevertheless, it was good to see the car get positive coverage.