markulele

So, how does the majority buy their cars with?

a)pay all in cash

b)lease

c)finance?

joshua d

cash, plus possible trade in

picus

+1. I am sure a lot of folks finance, but I've always found it makes a bad investment even worse.

umpalumpa

Like driving a new car about every 3 years myself....so i LEASE! NOTHING DOWN!!!

snapgt

Pay in cash. My philosophy is if I can't pay cash, then I have no business buying the car.

-snap-

VitB6

So then Snap I suppose that you bought your house in full with cash? Perhaps your college degree, up front in cash. Gimmie a break. Financing a car is more than reasonable. In fact it is a MUCH BETTER way to invest your money then to pay for it up front. You are taking $40K and throwing it away. I'm taking $5k and making monthly payments at 5.5% interest and investing the remaining $35K making 20% a year. Who comes out ahead now?

sha4000

iTrader: (1)

yeah i think that about sums it up

joshua d

What specific investment are you doing that is making you a solid 20%? No really I would love to know because then I may do that instead.

You are loosing the 5.5% plus the taxes on the earnings from your investment, if you are still ahead then I want to know your formula!

lemme know

Ratman009

Without getting into some seriously high risk stuff, the only way you're seeing a consistent 20% return is on real estate, and there aren't too many areas of the country seeing 20%/year increases in that. Please, share with us your investment knowledge, so we can all afford to pay 40K CASH for our cars, like some other people here

picus

Word, even high yeild CD's are only up to 2-3% now. I am sure you could go into a high risk stock grab and make 20%, but it's doubtful (unless you're investing in crack). Even when I moved from California to Canada I made 22% a year on my house, and that was obscene. I don't think 20% is very realistic right now. Anyway I doubt it's worth arguing about.

PhilipMSPT

iTrader: (5)

Mathematically calculating:

Pay with cash = $5-8k loss in immediate depreciation after purchase, but you still end up with the car's value in the end.

Lease with no down = monthly payments pretty much equal the depreciation of the car, but you end up with no car in the end.

Financing with down = down payment equals immediate depreciation value (with Gap Insurance), financing costs add up to approx extra 20% cost of car, but you end up with the car's value in the end.

In other words:
Cash = Car's Value
Lease = Depreciation Value
Finance = 120% Car's Value

THE MATHEMATICAL ANSWER: Lease a car with no down, then pay for it full in cash at end of lease.

Did I do that right?

TimboIS

Minus the 40% in taxes you're paying on your gains.

Basically, leasing is for people that can't afford what they want. It's the greatest hook auto makers invented in the past 20 years. And I mean that in bad way,

kensteele

Why are you even arguing this? Each of those are based on risk and since everyone has different thoughts about risk and perceived value and everyone's finances are different, you can't possibly decide which is better.

If you are teaching your 17 yr old to manage money, you might put some money down on the car, finance the remainder, and have him pay the monthly from his job money.

If you just won $250,000 in the lottery, you might pay cash since you won't be quitting your day job.

If you can't afford the car and you want to drive one anyway, you might lease.

VitB6

CD's? Who puts money in a CD? You can't make any money by putting it in a CD. A CD is the most conservative investment you can make and IMO...worthless.

There are several mutual funds that have an annual 15-25% yield. Do your homework and you can spot them. Plus play the market with solid stocks. If you have no knowledge on these things you wouldn't know half of these things exist and you wouldn't know where to start, so I guess it makes sense that you would bash it. And there are ways to move your money around and invest in certain areas that you can avoid paying 40% of your profits in taxes. You need a good accountant.

Secondly, leasing a car is not for people that can't afford what they want. That is such an elitist attitude. If you want a new car every 2 or 3 years then why would you buy a car? There is no reason to buy a car. You can avoid putting your money into a depreciating "investment" by leasing a car.

Like it or not, spending your money to purchase ANY car in full (15K or 30K or 50K whatever) is the worst thing you can do with your money, no matter if you have it or not. If you are a millionaire and you pay for a 100K car in full then it just doesn't matter because you are a millionaire, but it doesn't make it the best thing for your money. If you aren't a millionaire and you pay for 50K car in full then you are just an idiot for doing so. There are so many better places to put your money instead of lining your dealerships pockets in 1 day.

Believe it or not, go ask any accountant or financial expert.

mdnghtblu

The flip side to that is if you have a well trusted financial team (lawyer, financial planner, and accountant) then it might not be a bad thing to pay cash for a car. You forego the $35k you could use on investments because having a financial team means that you are currently using your cash resources on other investments hence having a well diversified portfolio. The ROI that you are making should relatively balance out one's decision to pay cash for a car.

I myself usually lease cars for the same reason someone else stated earlier that having a new car every 3 years or so is convenient. The only car I bought and am keeping is my MR2 spyder. For the upcoming IS, I plan to pay cash.