Why is financing a car bad?

[Paul der Krake]

Those who are in favor of financing also leave out risk. If you lost a job or something you still have to make that payment. Sure, you might have the money invested somewhere, but then you are taking the risk of selling at the wrong time. Any money you have tied up in an emergency fund should not be in the market, so you're not making more on it there. If you have car payments that means that your emergency reserves need to be that much larger.

So much this. I've been wondering along similar lines if some people got affected in 2008 because they kept mortgages and invested the money instead, following a similar logic.

Then the economy hits a bump, people lose their jobs so harder to make mortgage payments and have to sell stocks at the worst time. It's a double hit, and if the house value crashed at the same time it's a triple hit.

This can easily be alleviated by keeping your debt payments well under whatever unemployment insurance payment you would receiving in the event of a job loss. In other words, by living under your means.

[Goldielocks]

My point wasn't about the math, that is fine.  It is that it still adds up to peanuts for a lot of paperwork / tracking / effort.

It is really no different (maybe more expensive, even) than people that want to get a 0% balance transfer card for 9 months, to invest the money.  The math works, but it is a lot of effort to make happen.

[Telecaster]

Those who are in favor of financing also leave out risk. If you lost a job or something you still have to make that payment. Sure, you might have the money invested somewhere, but then you are taking the risk of selling at the wrong time. Any money you have tied up in an emergency fund should not be in the market, so you're not making more on it there. If you have car payments that means that your emergency reserves need to be that much larger.

Actually the opposite.   If you save up in order to pay cash for the car, it ultimately means you have lots of money in cash reserves for long periods of time until you are ready to buy.  And you not only need enough cash for the car, right up until you buy you need enough cash for the car AND enough cash for emergency fund.