To finance or pay cash for a 370Z

seecue

I noticed there are quite a few of you that paid cash for your 370z instead of financing it. I thought it would be interesting to see why? Maybe even how did you come up with the cash to pay for it? I understand this thread could lead into the beaten to death debate of being able to get better rate of return on investments vrs interest cost savings on paying off a depreciating asset at once. BTW work is slow so I'm just killing some time

areyouin729

this is pretty basic question if you ask me

if you have $30-40k laying around and dont need it why finance? doesn't make sense really

m4a1mustang

It is really specific to your financial situation.

In general, it's always best to pay cash outright. You don't have to worry about the loan or paying any interest... it's yours.

I know a lot of people like to think that it's better to finance because you can earn a higher rate on your money elsewhere, but to do that you're going to have to risk that cash. Chances are the risk free rate is going to be less than your loan rate, so do you really want to risk losing the money that's supposed to pay the car off? It's just not worth it. You'll end up taking on unnecessary risk as you try to split hairs. (In plain English: to earn a higher rate of return than the rate you're paying on your loan, you will have to invest the cash that otherwise would have paid for the car in risky assets. NOT a good idea.)

If you must finance, it's important to make a large enough down payment such that your loan won't be underwater for the life of the loan. Research resale values for the vehicle and determine how much you need to put down to accomplish this.

It's also extremely important to look at the total cost of your loan, not just the monthly payments. Make sure you are paying the least amount of interest possible. Obviously the shorter the loan term the better. Far too many people look at monthly payments only and end up taking out 72 month loans and get raped on total interest cost.

If you don't have enough cash available for a down payment on the vehicle you're looking at, you need to take a step back and save up more or consider a less expensive vehicle. If you MUST have it, then buy GAP insurance to protect yourself in case the car is totaled or stolen and you owe more on it than it's worth.

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mick

probably because most people who paid off their cars didn't touch their investments, so their ROI isn't affected at all.

i read there's an italian proverb that says there are three ways to get rich:

born into rich family
marry into a rich family
or
go rob a bank

koeppelnissan

There are no subvented rates on the Z, so if you have the cash, pay for the car. You're not gonna get more than 4% on most investments, so why pay more than 4% interest!

m4a1mustang

Indeed. But don't deplete all of your cash (I know you said it already -- I'm just reiterating). You want to make sure you leave enough behind to fund at least 6 months of expenses.

If you only have $40k in cash and are looking to buy a $40k car, I wouldn't pay all cash for it. I'd make a sizable down payment and finance the remainder with a short-term loan.

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yubman

Solid advice. Many people only look at the monthly payment and totally forget the interest paid adds to the overall cost of the loan.

Also if you intend to pay extra, payments made early on save more interest than extra paid near the end of the loan.

m4a1mustang

Yup. Aside from failing to negotiate the selling price, it's probably the biggest mistake a buyer can make. It happens all the time as was evidenced in a thread from the other day.

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seecue

m4a1mustang,

I agree with your advice as well. I'm planning to buy a used Z instead of new, although I would love to get a new one, the 2-3 year depreciation hit gets me.

I currently have payments on my s2000 (bought used), which should be paid off by the end of this year. (I had a 5 year loan, but will be paid off in 3), I could of paid it off sooner but ever since the market tanked I have been investing substantially more into my 401k and roth IRA, as well saving emergency cash since work is slow. Hopefully in the long run this pays off. (I am 28 BTW)

Since I already have monthly payments, some told me to just trade it in, but I think this is bad idea. Instead, I will pay the s2k off and decide whether or not to purchase the Z later. Hopefully I can resist buying the Z before then. Wish me luck! lol.

m4a1mustang

A trade would be fine as long as owe less than the trade in value. With car purchases you almost always end up "losing" money, it's just important that you don't lose anymore than you have to.

Good luck with being patient. I ended up buying mine a few months earlier than I planned. I was driving an '06 Civic at the time (with no car payment) and just wanted to go fast.

Priorities.

I do have to say, though, having an S2K definitely helps with being patient. Those are fun cars and if you drive it into the ground you can really save a lot of coin while still having a lot of fun.

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seecue

^exactly the s2k does help being patient. Rolling over negative equity is definitely bad, Good news is if I decide to sell it in two or three years from now the delta in price shouldn't change that much since it already took a biggest hit the first 5 years.

OldGuy

I'm a conservative old guy. In your position, as a younger guy, if I couldn't pay cash for a new Z, I wouldn't buy it. I would buy a more affordable car for the time being. One of my practices through life has been to avoid buying things until I can pay cash for them, as I do for my cars. Debt service is one of the heaviest drags to reaching financial independence. There is a functional alternative to virtually every purchase that is more affordable. How I came up with the cash for my Z purchase? The traditional way---saving up for it. You asked...

roplusbee

Well said.

Normally, I would do the same (buy used and pay cash), but I want to make a move on a NEW car this time and get that confident feeling, knowing that I have a warranty. I am looking to finance for no more that 3-4 years max. Even then, I plan on paying off earlier than scheduled. We'll see how that goes and good luck with your plans.

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Micas

Maybe a different take on this, but you have to choose which camp you want to be in. Most people live paycheck to paycheck, and have very little savings. They buy a car where the monthly payment doesn't leave them a negative net income for a particular month. This is obviously very bad.

I'm 43 now, and I've owned 4 cars total. The Z will be my 5th, when I find the right one. My mortgage will be paid off in about 5 years. I live below my means, because that means my standard of living will be better as I go along as I'm not throwing away money on useless things (like interest on a car note).

The flip side of the coin is that wealth is relative. You can't be financially well off unless other people are poor. I'm amazed that the vast majority of Americans are very financially irresponsible, however, that improves my own relative position. If everyone were responsible, inflation would rise dramatically and the money I've saved up woud be worth less.

It's up to each individual to decide which side of the coin they're going to be on. Certain cars are very attractive to people who cannot afford them. Resisting the temptation just may define them.

g96818

although i could have paid full in cash, i financed 15k to help build credit. should help me when i apply for a home loan, cuz credit cards can only go so far to build credit.

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