Author Topic: New car - cash or credit?  (Read 1402 times)

SavinMaven

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New car - cash or credit?
« on: November 27, 2020, 12:27:22 PM »
While it's surely facepunch-worthy, we are going to buy a new car from a dealer in the next three to four months. We will not have a trade-in, and could either pay cash or finance it.

I remember reading in the Millionaire Next Door his method for car buying: handle it like a procurement specialist. Contact the sales manager with your specs, specify it's a cash purchase, and ask for a quote.

OTOH, I've heard if you pay cash, you might not get the best price, as a good chunk of profit is on the financing side.

And then from the overall financial efficiency viewpoint, 0% or 0.9% interest over 60 months is probably a good bet. I don't need the cash, but this crazy year, it doesn't seem like a terrible idea to have extra cash on hand, either. If we paid cash for the car, afterward, we would still have about 8 months of usual monthly expenses in liquid savings.

Any thoughts on how to weigh these factors? Anyone actually done the Millionaire Next Door buying method - did it work?

chicklets123

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Re: New car - cash or credit?
« Reply #1 on: November 27, 2020, 12:50:16 PM »
I would do credit and keep the cash into something that returns more since it is only 0.9%.


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MrsSpendyPants

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Re: New car - cash or credit?
« Reply #2 on: November 27, 2020, 12:53:57 PM »
Are you sure you can get 0% or 0.9% APR?  Toyota and Honda in my area are only offering 1.9%-2.9%.  That makes a difference to me.

nirodha

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Re: New car - cash or credit?
« Reply #3 on: November 27, 2020, 01:20:58 PM »
I bought from a dealer last year. I started expecting to buy a new car (Honda CRV or Toyota RAV4) with cash. I knew what I wanted and got quotes from the internet sales department of various dealers. They ranged by a few grand, with a local high volume dealer having the lowest price. Having cash didn't help me at all. Some models had specific financing incentives, but nothing for what I was buying.

I ended up with a used CRV from the Toyota dealer. We were heading over to his sister dealership, to try the new CRV. The Toyota salesman wanting to close saved us more than any of the internet haggling. It did help that we had a low anchor on the new car price, I suppose.

NotJen

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Re: New car - cash or credit?
« Reply #4 on: November 27, 2020, 01:24:14 PM »
...

I remember reading in the Millionaire Next Door his method for car buying: handle it like a procurement specialist. Contact the sales manager with your specs, specify it's a cash purchase, and ask for a quote.

...

Anyone actually done the Millionaire Next Door buying method - did it work?

What do you mean by "did it work" - why wouldn't it?

My BF just bought a car using this "method" - he contacted the dealership with the exact model he wanted, offered a price, no financing, no trade-in.  They did one back-and-forth before agreeing on a price that he considered fair.  He purchased the car at that agree-upon price (took less than an hour once he was at the dealer to do a short test drive, sign the paperwork and hand over the check, and have the dude hook up his phone or whatever it is they insist on doing before they let you leave).

SavinMaven

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Re: New car - cash or credit?
« Reply #5 on: November 27, 2020, 01:31:08 PM »
Quote
What do you mean by "did it work" - why wouldn't it?

There was a thread a while ago of someone who had tried this by phone, and the price they heard, once they showed up, the dealer did not honor.

It does sound like a very appealing way to buy a new car. Less hassle, negotiate from afar, then just go finalize the transaction. Glad to hear it worked out for you!

foghorn

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Re: New car - cash or credit?
« Reply #6 on: November 27, 2020, 02:12:04 PM »
A few years ago I was in the process of purchasing a new car and the dealer offered a better price if I financed the car (my preference was to pay cash).  The price of the financed car was low enough to make the process worthwhile.  When the first car payment bill showed up, I paid off the entire car and was done. 

I assume the sales person was incentivized to get me to finance the vehicle.  He never knew - or cared - that I paid the whole thing off a few weeks later.

Something to consider. 

Cranky

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Re: New car - cash or credit?
« Reply #7 on: November 27, 2020, 02:12:36 PM »
The last car we bought we went to the dealer, agreed on the price, and then said we were paying cash, at which point we were offered a lower price.

I’m not much of a negotiator though. I just want to get it over with.

Mustache ride

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Re: New car - cash or credit?
« Reply #8 on: November 27, 2020, 02:31:56 PM »
In my experience, offering cash didn't lower the price of the car. They were actually pushing the financing special which was only .9 or 1.9%. Either way, I'll borrow money at that rate all day long.

RedmondStash

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Re: New car - cash or credit?
« Reply #9 on: November 27, 2020, 02:57:23 PM »
Yeah, when I looked at buying a new Kia Soul EV a few years ago, the financing price was much better than the cash price. They did not allow the option of paying off the entire thing early on and thus avoiding the interest. IIRC, they did offer the option of paying for the financing option in one lump sum, but including the interest it would have accrued over the life of the loan.

Very strange, that cash won't get you as good a deal as financing. Next time, I should see if it's possible to finance and then pay off completely with the first payment, without penalty.

I did not buy that car. Went with a used car instead, from a private party.

bmjohnson35

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Re: New car - cash or credit?
« Reply #10 on: November 27, 2020, 03:11:46 PM »

If you decide to pay cash, don't state that up front.  See video below for details.


https://www.youtube.com/watch?v=0S9cQOPxzfg

PDXTabs

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Re: New car - cash or credit?
« Reply #11 on: November 27, 2020, 03:23:58 PM »
When I purchased the 2014 Ford Focus I had the option of financing at 0% or a $2K discount for paying cash. But if I financed I was able to pay the state sales tax with the loan. So my options were $20K in cash or $22K over 60 months at 0%. I'm not sure how exactly to value the difference but I happily took the 0% loan.

Duke03

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Re: New car - cash or credit?
« Reply #12 on: November 27, 2020, 03:45:32 PM »
You'll always get the best lowest price by financing.  These days there are just to many rebates and dealer kick backs tied to financing.  Of course nothing prevents you from getting the best price with rebates ect financing it and then paying the loan off the very next day.  This is the best route.  Most dealers won't wiggle on price if you tell them you are a cash buyer.  They will actually make less because then they don't get to sell the loan and get a kick back on the finance side.

Wintergreen78

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Re: New car - cash or credit?
« Reply #13 on: November 27, 2020, 06:40:11 PM »
I bought a new car at the beginning of this year with cash. I had a very specific model/trim I had decided on. I was able to use the VW web site to find the dealers that had it in stock. I emailed the two I found asking for an out-the door price. One emailed me back with a really good price. The other wouldn’t give me a quote, they just tried to get me to show up in person so we could haggle. The car I bought was a golf, and the out the door price was almost exactly the same as the last one I bought 13 years ago, and $4,800 under MSRP.

I went with the dealer that gave me a quote and the actual interaction in person went great. They still asked if I wanted to finance, but when I said no they just moved along. They had the car ready and all the paperwork prepped.

I’d search the dealer inventory on-line for a few different dealers, then email each of them asking for a quote on the specific car you want. If a dealer won’t give a quote by email, then I wouldn’t want to deal with them. Similarly, if I was trying to decide cash vs finance, I’d expect them to give me a quote for each option. The manufacturer web sites all post whatever deals they have going on, so I have zero interest in going to a dealer in person to get that information from a salesperson.


bmjohnson35

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Re: New car - cash or credit?
« Reply #14 on: November 27, 2020, 07:05:14 PM »
I bought a new car at the beginning of this year with cash. I had a very specific model/trim I had decided on. I was able to use the VW web site to find the dealers that had it in stock. I emailed the two I found asking for an out-the door price. One emailed me back with a really good price. The other wouldn’t give me a quote, they just tried to get me to show up in person so we could haggle. The car I bought was a golf, and the out the door price was almost exactly the same as the last one I bought 13 years ago, and $4,800 under MSRP.

I went with the dealer that gave me a quote and the actual interaction in person went great. They still asked if I wanted to finance, but when I said no they just moved along. They had the car ready and all the paperwork prepped.

I’d search the dealer inventory on-line for a few different dealers, then email each of them asking for a quote on the specific car you want. If a dealer won’t give a quote by email, then I wouldn’t want to deal with them. Similarly, if I was trying to decide cash vs finance, I’d expect them to give me a quote for each option. The manufacturer web sites all post whatever deals they have going on, so I have zero interest in going to a dealer in person to get that information from a salesperson.

We don't buy new cars anymore and haven't been in a dealership to buy a car in years, but it was already getting difficult to find a dealer to provide a firm quote over email at that time.  I wouldn't even trust any quotes by phone.  The sales process is modeled around financing these days and many simply won't discuss prices in a straight-forward way.  I'm sure they're still out there, but the OP should be prepared for a lot of frustration if wanting to pay cash.  If you can get 0% financing, it probably isn't worth the extra trouble.

v8rx7guy

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Re: New car - cash or credit?
« Reply #15 on: November 27, 2020, 07:19:56 PM »
In my opinion,  the interest is built into the new car prices these days.  Buy a 3 year old used car with cash.
« Last Edit: November 28, 2020, 11:09:15 AM by v8rx7guy »

Just Joe

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Re: New car - cash or credit?
« Reply #16 on: November 28, 2020, 11:08:13 AM »
Why buy a new car?

Years ago we bought a used 3 year old off-lease car with ~45K miles. It was as good as new inside and out. It now has roughly 100K miles. During that time I've DIY changed the fluids and filter, also DIY replaced the front brake rotors b/c the originals warped. Almost due for a timing belt and spark plugs now. I'll DIY those as well.

At 10K miles a year this represents alot of years of usage. 

rmorris50

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Re: New car - cash or credit?
« Reply #17 on: November 28, 2020, 11:17:35 AM »
Anyone use Carvana and if so how was the experience?

I still have two years on a car lease, next car want to buy used and pay cash.

Any cost effective way to get out of a lease early?


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PDXTabs

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Re: New car - cash or credit?
« Reply #18 on: November 28, 2020, 11:28:05 AM »
In my opinion,  the interest is built into the new car prices these days.  Buy a 3 year old used car with cash.

I think that it depends on the vehicle. Some cars that works great, some "cars" like a Toyota Tacoma it just doesn't make sense because they basically haven't depreciated but they did get a bunch of wear and tear.

lhamo

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Re: New car - cash or credit?
« Reply #19 on: November 28, 2020, 12:22:54 PM »
A few years ago I was in the process of purchasing a new car and the dealer offered a better price if I financed the car (my preference was to pay cash).  The price of the financed car was low enough to make the process worthwhile.  When the first car payment bill showed up, I paid off the entire car and was done. 

I assume the sales person was incentivized to get me to finance the vehicle.  He never knew - or cared - that I paid the whole thing off a few weeks later.

Something to consider.

We did this, too -- got a $2000 discount for using dealer financing. The salespeople/managers get incentives for how many people they get to take it.  We paid it off with the first payment - paid something like $17 in interest.

I still regret putting as much as I did down by check -- I could have put a couple thousand more on the cc to get more cash back.

Sandi_k

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Re: New car - cash or credit?
« Reply #20 on: November 28, 2020, 01:32:29 PM »
Anyone use Carvana and if so how was the experience?

I still have two years on a car lease, next car want to buy used and pay cash.

Any cost effective way to get out of a lease early?


Several friends have used them and been quite happy.

And try swapalease.com - a friend who used to do financing at a Ford dealership has given it his seal of approval.

ohio4life

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Re: New car - cash or credit?
« Reply #21 on: November 30, 2020, 07:00:37 AM »
Anyone use Carvana and if so how was the experience?

I still have two years on a car lease, next car want to buy used and pay cash.

Any cost effective way to get out of a lease early?


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We sold a lease using Carvana. It was super easy and a great experience. Getting out of lease and getting paid to do so seemed like we were ripping them off.