Right out of school, 7 years ago, I financed my cars because I didn't have any alternative. I now pay cash for any car purchase. My logic is that I will take the imputed car payment each month and dollar-cost average that into a good diversified mutual fund.

It's been working well so far. For your situation, it sounds like you need to get a nice, decent enjoyable ride and finance it. Pay it off, drive it for a while and save up money for your next car. At that point, you should have a lot of equity and cash to put down on your next vehicle.

 

Those of you that say that a 3.9% loan (or whatever) is cheaper than a 5% CD or savings account are not taking into consideration the non-deductible nature of interest expense on a vehicle and the taxability of the CD interest income. Your after-tax cost of the loan is higher than your return on the CD, et al.

Additionally, there are often rebates in lieu of 0% financing, so taking the rebate and paying cash will often times be cheaper in the long run than passing on the rebate and taking the low interest rate.

 

I'd try and find a good financing deal. My friend bought an 2007 STi for 36mon @ 0%. Granted that since he put little down his payments where huge, but he had the cash so he made his payments using some of the cash he was going to use to buy the car outright and made good interest off the rest.

 

I might be the odd one out here but I don't mind financing if I know I can pay it off early, aka within 6 months, with no penalty. I don't mind paying a little extra for what I want now right away (emphasis on LITTLE).

 

I said 2.9% which is a wash (same as 5% rate I have to pay tax on) but in the case of a wash I'd just as soon keep my money rather than have the loan company keep it.

But anything higher than 2.9% gets to the point where the loan costs more.

You are correct there can be cash savings in place of low interest rate, but not always or if they are they may not be as good.

What's better $750 cash off or 2.9% finance. Often you can add it up and the low rate would be the same as the cash back in which case for me if it's the same I'd just as soon pay over time.

If there was a great rate such as 0% for 5 years that's worth more than $5K on a $40K loan which is probably worth more than the rebate.

 

That's a good point. There's a lot of math involved in finding the true "break-even" point for that scenario. Personally, I think that having that extra cash-cushion is reason enough (to me, anyway) to finance in most scenarios rather than pay cash.

I'm not really sure what I'll do on my next purchase. I haven't had car payments in almost 2 years, and I kinda like that.

 

I drive a spec E30 as my daily, and spend my cash elsewhere. In fact, the two snowboards I just bought for my wife and I came out to be more than I paid for my car. But it's fun and reliable, and life is much more enjoyable with a fatter bank account.

 

I will say that buying a car (unless your rich) cash is tha dumbest thing you can do, because if you buy a car cash then thats (like you put it) 20k vs you finanicing the car and in the process building your credit! Wich in the far run is the smarter thing to do. Now the gentlemen that posted the first comment said : the way things are going you'd be better off waiting and buying the car cash, wich i completly dissagree cause then you'd be left over with no money vs if you do finance you can be paying the loan monthly and IF the economy does crash than you can be paying the loan slowly, while you still have money that you can use if needed. Like i said this is good only for people that arent rich (middle class people)I think you should definitely finance Well what do i know , im just 22 years old , with a 742 becon score , and have my s2k that i got an excellent financing rate. 2000 s2k and i got a 5.9% wich is not the best but thats because not any random bank wants to finance a 2000 vehicle. Good luck!

 

Building credit? I turn down so much credit these days it is absurd. My stepson did not yet graduate college, and had no full-time job, when his credit offers came rolling in.

 

Just cause you can get cards does not mean you have good credit........

Building good credit and credit history takes time and consistency on payments