Should I finance a car?

[waltworks]

So we need a new car (well, van, we have 3 kids and a grandparent dependent to haul around). We could easily pay for the van in question in cash, or we could finance it at something like 3% (or maybe cheaper? We have 800+ credit scores and no revolving debt).

I'd assume I'll do better than 3% with my money working in the market, and I'm ok with taking the chance that doesn't happen. Is there any reason not to finance a car in this situation? I'm generally anti-debt outside of mortgages and student loans but the real interest rate is zero and could easily go somewhat negative if we get a tiny bit of inflation over the next few years.

-W

[YttriumNitrate]

At least the last time I bought a new car there were different incentives if you paid cash compared to taking out a loan. I recall it being something like 0.9% financing, or $500 cash back if you didn't finance. I think I also got a bit extra by putting part of the purchase on my 2% back credit card. Also, I believe if you finance the vehicle you are required to carry comprehensive insurance.

[katsiki]

I would at least consider financing in this case.  Depending on dealer/seller, year etc you may get a better rate from the dealer.

Here is a good credit union also for comparison:

https://www.penfed.org/auto/rates

[dougules]

Honestly with the market where it is, 3% interest vs paying cash seems like a wash really.  If you can get better than 3%, then financing starts to look like the better option IMHO.

Edit:  I didn't think about inflation.  Financing is probably the better option when you add that into the equation. 

[Paper Chaser]

Assuming you're going to keep the van for a long time, I think it could be the right choice

[RWD]

I financed our last two cars at sub 2%. Absolutely worthwhile if you aren't buying a more expensive car because of the financing. At one point even our Ally Savings account had a higher interest rate than the car loan!

[Wolfpack Mustachian]

At least the last time I bought a new car there were different incentives if you paid cash compared to taking out a loan. I recall it being something like 0.9% financing, or $500 cash back if you didn't finance. I think I also got a bit extra by putting part of the purchase on my 2% back credit card. Also, I believe if you finance the vehicle you are required to carry comprehensive insurance.

I would just ensure you check on how much the increased (assuming you were planning on doing less) insurance costs. This will be your biggest monetary drawback as far as I am aware.

[waltworks]

This is an expensive enough vehicle that we'd carry comprehensive insurance anyway.

My other hangup is that I'd prefer to buy an EV, but there's really nothing out there right now (needs to carry lots of passengers and have decent range) that will work. In 5 years there probably will be, but we can't wait 5 years. Our current van is literally and figuratively falling apart (and is too small).

-W

[nereo]

We just bought a used PHEV - financed at 1.99%. Didn’t seem to be any reason for us not to finance at those rateS

As long as you don’t use cheap financing to waste more money than you otherwise would, it’s a smart plan.

[RWD]

This is an expensive enough vehicle that we'd carry comprehensive insurance anyway.

My other hangup is that I'd prefer to buy an EV, but there's really nothing out there right now (needs to carry lots of passengers and have decent range) that will work. In 5 years there probably will be, but we can't wait 5 years. Our current van is literally and figuratively falling apart (and is too small).

-W

I'm assuming the Tesla Model X is too expensive and/or the third row seats aren't usable enough? Rivian R1S is supposed to start deliveries in August but that's an $80k vehicle...

As a transition vehicle you could consider the Chrysler Pacifica Hybrid (plug-in hybrid minivan with 33 miles of pure electric range). Looks like these can be found for under $30k used (I even see a few near $20k).

[waltworks]

We need to hold 5-6 people (3 of whom are growing fast), plus mountain bikes, climbing gear, etc. I am a ski and bike coach and while none of the kids is yet old enough to need to travel to races or events, they will be in the next few years, so I'll probably be transporting a dozen devo ski racers and such frequently.

The Tesla is awesome but it won't even vaguely accomplish that. I mean, we don't fit in a minivan anymore.

-W

[sonofsven]

The main thing I would be concerned with is the price. Are you paying more than you could be because of any financing in place, or foregoing any cash back offers to get the financing?
Car buying tutorials always stress negotiating price before any commitments to financing or trade ins.

[Greystache]

Financing is often very profitable for dealerships. You may be able to negotiate a better price if you agree to finance the purchase with the dealer. Just make sure that there is no penalty to pay off the loan early. If you decide later on that financing the purchase isn't working for you, you can just pay it off.

[yachi]

My other hangup is that I'd prefer to buy an EV, but there's really nothing out there right now (needs to carry lots of passengers and have decent range) that will work.

I hear you.  I'm following Volkswagen's ID Buzz, and disappointed that its arrival is delayed. 

[waltworks]

My other hangup is that I'd prefer to buy an EV, but there's really nothing out there right now (needs to carry lots of passengers and have decent range) that will work.

I hear you.  I'm following Volkswagen's ID Buzz, and disappointed that its arrival is delayed.

Don't worry, once I drop $30k on a big ass gas-burning van, lots of nice EV vans will come out within a year. That's how things tend to go when I'm involved.

-W

[charis]

The rate sounds good, but I ruled out financing on our last "new" car when I realize that I would be spending more going that way.  We bought used via private sale at under market value.

[waltworks]

It would be great to buy under market value. Unfortunately we live in Utah during Covid, so big vans are at a premium due to demand from both ends of the societal spectrum. Our only options currently are used fleet vehicles, basically (unless we wanted to blow 2x the money and buy new). If there's a discount for paying cash, I'll certainly do that. But I don't think that's usually an option in this case.

-W

[trollwithamustache]

I've always financed vehicle purchases because it renewed my savings ability. the payment really motivates me to tighten up and demolish the loan.

and then we coast out to a higher savings rate for a while after. 

[norajean]

I sure hope you are not buying new.

[waltworks]

I sure hope you are not buying new.

I thought I already said this a couple of times, but no, this would not be a new vehicle.

-W

[Dicey]

I sure hope you are not buying new.

I thought I already said this a couple of times, but no, this would not be a new vehicle.

-W

Well, it's going to be "new" to you, right?

Not sure why anyone felt the need to be so dang blunt about it.

[RWD]

My other hangup is that I'd prefer to buy an EV, but there's really nothing out there right now (needs to carry lots of passengers and have decent range) that will work.

I hear you.  I'm following Volkswagen's ID Buzz, and disappointed that its arrival is delayed.

Don't worry, once I drop $30k on a big ass gas-burning van, lots of nice EV vans will come out within a year. That's how things tend to go when I'm involved.

-W

Here's your electric VW Bus (sorry, already sold):
https://bringatrailer.com/listing/1967-volkswagen-bus-29/

[lutorm]

This is an expensive enough vehicle that we'd carry comprehensive insurance anyway.

My other hangup is that I'd prefer to buy an EV, but there's really nothing out there right now (needs to carry lots of passengers and have decent range) that will work. In 5 years there probably will be, but we can't wait 5 years. Our current van is literally and figuratively falling apart (and is too small).

-W

I'm assuming the Tesla Model X is too expensive and/or the third row seats aren't usable enough? Rivian R1S is supposed to start deliveries in August but that's an $80k vehicle...

As a transition vehicle you could consider the Chrysler Pacifica Hybrid (plug-in hybrid minivan with 33 miles of pure electric range). Looks like these can be found for under $30k used (I even see a few near $20k).

We're very happy with our Pacifica Hybrid. IMHO for a full-EV minivan-sized vehicle you will pay for a huge battery (poor aerodynamics, so large energy consumption) so unless you are literally just driving long-haul all the time the 30-mile electric range on the pacifica is perfect. We only use gas when driving out of town, which we don't do often enough that we'd ever make back paying for the battery. (That also depends on your gas vs electric price in your area, though. It's very unfavorable here in HI.)

[MilesTeg]

So we need a new car (well, van, we have 3 kids and a grandparent dependent to haul around). We could easily pay for the van in question in cash, or we could finance it at something like 3% (or maybe cheaper? We have 800+ credit scores and no revolving debt).

I'd assume I'll do better than 3% with my money working in the market, and I'm ok with taking the chance that doesn't happen. Is there any reason not to finance a car in this situation? I'm generally anti-debt outside of mortgages and student loans but the real interest rate is zero and could easily go somewhat negative if we get a tiny bit of inflation over the next few years.

-W

Yes, but if and only if you would pay for comprehensive insurance for the term of the loan anyway. Also make sure your lender doesn't require an insane $500 deductible. We carry comprehensive but at a $2500 deductible because we would only use that for a total or near total loss.

As far as cash back vs rates you have to run the numbers on each option to determine which offer is the cheapest

[waltworks]

I think it'll just end up being cash.

Gosh, I hate cars. If I lived somewhere big enough to have a car share type service I'd probably do that and just rent a vehicle for road trips.

-W

[nereo]

I think it'll just end up being cash.

Gosh, I hate cars. If I lived somewhere big enough to have a car share type service I'd probably do that and just rent a vehicle for road trips.

-W

We did this in our previous location, nad it was bliss. I hate how our current geographic location and work-status essentially requires us to own two cars.
 

[joedad189]

We're very happy with our Pacifica Hybrid. IMHO for a full-EV minivan-sized vehicle you will pay for a huge battery (poor aerodynamics, so large energy consumption) so unless you are literally just driving long-haul all the time the 30-mile electric range on the pacifica is perfect. We only use gas when driving out of town, which we don't do often enough that we'd ever make back paying for the battery. (That also depends on your gas vs electric price in your area, though. It's very unfavorable here in HI.)

this was my first thought, pacifica hybrid, buying used has worse loan terms,

looks like you can get $10-11k off of a new one right now,

i think we excluded this vehicle from our search a few years ago because of the spare tire, the pacifica hybrid either doesnt have a spare or its not full sized. But this was my first choice as it is a hybrid and i knew 90% of our trips would be sub 40 miles

[yachi]

My other hangup is that I'd prefer to buy an EV, but there's really nothing out there right now (needs to carry lots of passengers and have decent range) that will work.

I hear you.  I'm following Volkswagen's ID Buzz, and disappointed that its arrival is delayed.

Don't worry, once I drop $30k on a big ass gas-burning van, lots of nice EV vans will come out within a year. That's how things tend to go when I'm involved.

-W

Here's your electric VW Bus (sorry, already sold):
https://bringatrailer.com/listing/1967-volkswagen-bus-29/

It's beautiful, but eek: "The motors have fused the solenoids and caused battery failure according to the selling dealer. Replacement of the entire system is recommended."

[Flyingstache]

I just posted a very similar question (sorry I didn't see this before hand) so I appreciate all the opinions.

We also are going to be buying a van & could pay cash but wasn't sure if the rates made it worthwhile to finance instead. Always struggle with finding that balance.

[dougules]

I think it'll just end up being cash.

Gosh, I hate cars. If I lived somewhere big enough to have a car share type service I'd probably do that and just rent a vehicle for road trips.

-W

We did this in our previous location, nad it was bliss. I hate how our current geographic location and work-status essentially requires us to own two cars.

+1  I'm hoping to move somewhere not so car-centric after FIRE. 

[waltworks]

It may be moot, there aren't many vans out there and the sellers know it. I have gotten jerked around repeatedly.

Maybe we'll wait it out for the summer and get a big cargo bag for the roof of the minivan, and travel Beverly Hillbillies style.

-W

[Zamboni]

Hi Walt,

If vans are a particularly tight market in Utah, which totally makes sense, have you thought about looking outside your local area? We just flew one way to another state's urban area to get a used pick up truck, which is in very high demand in my local area, and my research makes me confident that it saved us $5-8K. Then we drove it home. We had a list of 5 specific trucks to look at where we were flying, so the odds that none of them would work out seemed pretty low to me. We ended up buying the second one we looked at. Also, the dealerships were fine with doing out of state taxes, registration, and plates.

Flights are often cheap right now, as are hotel rooms. Rental cars seemed normally priced. Even the most pessimistic view of our travel costs (which puts dollar values on my frequent flyer points) put the trip in at under $800, and it was under $500 if you don't value the points, so it seemed worth it to have a much larger selection of exactly the vehicle we were looking for. Plus, the trip itself was really fun . . . best pizza we've ever had, and my son and I had a nice time talking and listening to music on the way home!

Basically we looked on Autotrader and carvana and made the location radius really big (500 miles). We didn't go into it planning to travel; in fact we thought we would get something from the dealership closest to us. But, once we figured out where what we wanted was the cheapest by A LOT, we made that the central zip code and search that local area.

Good luck in your quest!

[waltworks]

Taking a multi-day trip away from family is not in the cards, though I could look at just paying ($1000-1500) to transfer a vehicle here. There really isn't much nationwide - and I'd have to buy sight unseen which is also a no-go.

We'll just wait and keep cramming in the minivan until something comes along.

-W

[Dicey]

Isn't that one of the services Carmax offers? We're pretty urban, but we always cast a wide net. When we were RV shopping, we looked all over the US. Happily, we found the one we wanted from someone who's practically a neighbor. We never saw it because he kept it at an indoor storage place several towns over. He had lots of interest, but sold it to us because we were first to respond and were so local.

[nereo]

I just used CarMax and was thrilled with the whole process.
They’ll ship any car in their inventory to the store of your choice - if it’s within ~100 miles it’s typically free. You can get cars 300 miles away sent for $99, or cross country for $249 IIRC. If you know what you want its pretty cheap to get that exact thing sent to you

Also, their 24 hour test drive rocks. Never really felt pressured to buy either ( we tested two different cars, eventually bought one)
It’s not the cheapest option, but it was better and easier than any dealership. For me, our time was worth it

[waltworks]

Carmax does not have a single van that would work for us. Like, not one.

Honestly, I'm not throwing more good time after bad at this point. I'll revisit in the fall and we'll just have to squish into the minivan for summer trips as best we can.

-W

[dougules]

Carmax does not have a single van that would work for us. Like, not one.

Honestly, I'm not throwing more good time after bad at this point. I'll revisit in the fall and we'll just have to squish into the minivan for summer trips as best we can.

-W

Maybe a summer trip to somewhere vans are plentiful?

[waltworks]

Big passenger vans are not plentiful anywhere in North America right now. Boo.

Maybe this is fate telling me to wait a few years for a Cybertruck.

-W

[Zamboni]

We actually did our travel-shopping trip in just 2.5 days. First flight out in the morning, picked up rental car and had a map to 4 dealerships, bought vehicle, stayed overnight, picked up vehicle the next day and drove home that afternoon through the next morning with a brief stop to sleep half way home. It might not be as bad as you think, bearing in mind that every place is probably a haul to where you live in UT.

We did finance it, but only because that was the most convenient thing to do. I'll be paying it off before the first payment is due.

My brother bought a big mercedes sprinter passenger van a few years back and they love it.
They are not cheap, though . . . unless you are in Hawaii. The COVID-19 tourism slump must be absolutely killing Hawaii right now. :-(
https://www.truecar.com/used-cars-for-sale/listings/mercedes-benz/sprinter-passenger-van/

[waltworks]

Yeah, even if the flight was free, 3 days of my time is much too valuable at this stage of my life. It would have to be local or else delivered here.

UT indeed pretty much the middle of nowhere, but it's not as bad as ID/WY/MT. At least we have a halfway decent airport 30 minutes away.

-W

[lutorm]

We actually did our travel-shopping trip in just 2.5 days. First flight out in the morning, picked up rental car and had a map to 4 dealerships, bought vehicle, stayed overnight, picked up vehicle the next day and drove home that afternoon through the next morning with a brief stop to sleep half way home. It might not be as bad as you think, bearing in mind that every place is probably a haul to where you live in UT.

We did finance it, but only because that was the most convenient thing to do. I'll be paying it off before the first payment is due.

My brother bought a big mercedes sprinter passenger van a few years back and they love it.
They are not cheap, though . . . unless you are in Hawaii. The COVID-19 tourism slump must be absolutely killing Hawaii right now. :-(
https://www.truecar.com/used-cars-for-sale/listings/mercedes-benz/sprinter-passenger-van/

Pretty much. If you add the cost and hassle of shipping it to the mainland, it might not be as good of a deal though...


Waltworks, you really think a cybertruck will fit more passengers than a minivan???

[waltworks]

Wow, truecar is great!

Yeah, HI has to be hurting. I wonder what it costs to put a van on a boat? Actually, strike that, I'm sure all the boats are anchored off Los Angeles/stuck in the Suez canal and unavailable.

Cybertruck was a joke...

-W

[partgypsy]

Did you check out carcana? I was happy with my purchase through them. They only sell relatively recent makes though

[Fuzz]

Curious what you mean by van bigger than a minivan. An Econoline? The Sportsmobile is even more expensive than a Sprinter. Maybe some summer camps or tour companies are getting rid of something that fits your needs.

Here's the gov auction site if you want to have some fun.

https://www.publicsurplus.com/sms/browse/cataucs?catid=406

[HipGnosis]

Have you looked at a bigger SUV?   They seem everywhere these days.

[waltworks]

Big SUVs do not seat 12-15 ski racer kids, unfortunately.

Also, huge thumbs down on TrueCar. They seem to exclusively advertise cars that are already sold, I've been through half a dozen now. Super annoying.

-W

[nereo]

Do all the kids need to be kept inside the vehicle, or just the ones you like and/or have potential?

Joking aside, I share your frustration - we were trying to buy 15 passenger vans for our swim team and like you we found there wasn’t much out there. Literally it was cheaper to buy two minivans than one large one (but then finding two drivers to drive them...)
Good luck.

[waltworks]

For now I'm just going to throw in the towel. What confuses me is why everyone suddenly wants *passenger* vans. They're horrible for camper conversions (all the ductwork/carpet/crap is in the way of installing beds and cabinets and stuff) which is what I assume people are mostly after vans for because of Covid. And lots of big tourist locations where people get shuttled around in vans are shut down...

Bizarre.

-W

[Zamboni]

Yeah, I agree cargo vans would be way better for converting into camper-vans. Also, I did notice that sold vehicles often do stay up on those sites for at least a few days. That's a drag.

Is there a way to set up Autotrader or one of those sites to ping your email with new vehicles that fit your search criteria? That seems like a way to keep your finger on the project without doing too much. Another option is to actually head to a couple of used lots and find a veteran salesperson to tell you are seriously looking. Try to find out which sales associates have been there awhile as I get the impression that some lots have tons of turnover. We did that with the "very tall child" and the sales guy did in fact text us when an appropriate legroom vehicle arrived on their lot that would also work because it fell into very tall child's limited budget.

Good luck!

[rothwem]

I sure hope you are not buying new.

I thought I already said this a couple of times, but no, this would not be a new vehicle.

-W

I actually think you'd be in a decent position to just buy new.  Buy exactly what you're looking for and keep it for a long time, and a couple thousand dollars amoritized over 10-15 years is nothing.  Used non-luxury cars are not a good value in this market, they're not that much cheaper and they're used.  Also, if you go with an American manufacturer, you're not going to pay anything close to MSRP for a new van.  Go to the ford site, pick you out the Transit van option you want, and send an email to 10 Ford dealers, pick the one that gives you the best price.  Secure financing from a local credit union and tell the dealership that you'll finance with them if they'll match/beat the credit union.