Should I finance or pay cash?

[drummerdimitri]

So my dealer proposed I finance the car with a bank they have a deal with.

Basically I get to chose to finance the car from a period of 1-5 years with a flat interest rate of 2.99% and a first payment of 25% of the car's present value with a grace period of 6 months.

I am getting a 4% interest rate on my savings in my bank so would I still be benefiting from a 1% gain if I finance vs 0% if I pay cash?

Is it too good to be true or am I losing money by financing the car?

What do you think I should do?

 

[Daveotto]

wrong forum - talk to a financial advisor!!!!!!!!!!!!!!!!!!!!!!

 

[drummerdimitri]

wrong forum - talk to a financial advisor!!!!!!!!!!!!!!!!!!!!!!

Just wanted to hear your opinion.

 

[AndyB-S3]

IMO If you go with the 60 month term you are losing a fortune.. You will eventually end up paying $110,900. ?.. Always best to pay off as early as possible.

On your $84k in the bank for example you would earn $3360 in 12 months so $87,360.00. (maybe you will have to pay tax against this, not sure on rules in other countries??) If you go with the 1st 12 month option it would eventually cost you $91,352.00. So going with 1st option you are still out of pocket by $3992.00? Every option after that would be worse.. But that's the price of being able to keep a hold of your savings for emergency etc?..

I think that's correct..been a long day for me.. haha I happily be corrected if need be,. lol

 

[Daveotto]

Just wanted to hear your opinion.

you got it

 

[drummerdimitri]

My 84000$ would become 102198$ in 5 years so i would be gaining 18198$ in 5 years worth of interest that is not taxable.

If I were to go for the 5 year loan, I would be paying 26900$ over the original loan amount so if I were to pay cash today I would be saving 8700$ in 5 years if I am not mistaken.

Is this correct? Should I just pay cash?

 

[AndyB-S3]

your $84k would only be at $100,800 in 5 years if my maths are correct. ?

I would hate to pay nearly $27k more than the car is worth tbh. if you are happy to pay cash now then do it. but if you would like to keep cash in the bank for a rainy day then pay finance..

 

[drummerdimitri]

your $84k would only be at $100,800 in 5 years if my maths are correct. ?

I would hate to pay nearly $27k more than the car is worth tbh. if you are happy to pay cash now then do it. but if you would like to keep cash in the bank for a rainy day then pay finance..

102,198.84$ to be exact with an interest rate of 4 %.

Money is not an issue at all fortunately so I was only considering taking a loan if it is going to cost me less on the long run and that is obviously not the case.

Never took a loan in my life and not willing to start now.

 

[AndyB-S3]

Ah well there's your answer....

 

[s3_trev]

If you have the money to buy it then buy it.

 

[A3_Rider]

Pretty simple decision making steps;

- Interest costs total (i.e. how much 'extra' you're paying above the car price for the whole deal)
- If you were to buy, what would it do e.g. what % of your flow would it hit and would it affect you/family/etc
- What equity will you have at the end, if any

Whether you have lots or not you should still make an informed decision!

For me monthly was better and gave flexibility.

 

[Blackwhite]

102,198.84$ to be exact with an interest rate of 4 %.

Money is not an issue at all fortunately so I was only considering taking a loan if it is going to cost me less on the long run and that is obviously not the case.

Never took a loan in my life and not willing to start now.

I paid for mine in cash.

 

[drummerdimitri]

I paid for mine in cash.

Good for you and so will I.

 

[Simon L]

Yep, cash buyer here

 

[Blackwhite]

Yep, cash buyer here

Simon,

You should be getting your car soon. When are you expecting it?

 

[Simon L]

Simon,

You should be getting your car soon. When are you expecting it?

Hi BW, yeah hopefully end of next week or thereabouts

 

[Blackwhite]

Hi BW, yeah hopefully end of next week or thereabouts

Awesome!

 

[Rob2k68]

I paid cash but it was somebody else's

Went the PCP route as it was the only way the math's worked for me - tend to buy all of my cars this way. Decided my biking days were over and combined my bike and car budget.

 

[Daveotto]

Large deposit (from sale of 18 month old A3 SB) and taking advantage of 20 month interest free credit card deals in the UK.

So only paying a 1% dealer Credit Card handling fee as interest over the 20 months on the balance, so in effect a 0.6% interest rate whilst cash earning 2%+ interest over the same period

 

[DarkBunny]

Always finance if it's 0%, you can be earning £ on your cash savings while paying back the zero rated finance - otherwise pay in cash.