Comments on: Is Buying a New Car For Zero Percent Interest Loan a Good Idea? http://personalfinancebythebook.com/is-buying-a-new-car-for-zero-percent-interest-loan-a-good-idea/ Making You a Winner at Money and Life Sat, 19 May 2012 22:49:31 +0000 hourly 1 http://wordpress.org/?v=3.3.2 By: The 3 Stages of Financial Freedom | Invest It Wisely http://personalfinancebythebook.com/is-buying-a-new-car-for-zero-percent-interest-loan-a-good-idea/comment-page-1/#comment-11836 The 3 Stages of Financial Freedom | Invest It Wisely Tue, 17 Apr 2012 03:07:24 +0000 http://personalfinancebythebook.com/?p=1452#comment-11836 [...] is a win-win situation. Just be sure to stay out of trouble (for instance, don’t use a zero percent loan just to increase your [...] [...] is a win-win situation. Just be sure to stay out of trouble (for instance, don’t use a zero percent loan just to increase your [...]

]]> By: Taking a Loan: Is Now a Good Time? | PrairieEcoThrifter.com http://personalfinancebythebook.com/is-buying-a-new-car-for-zero-percent-interest-loan-a-good-idea/comment-page-1/#comment-11024 Taking a Loan: Is Now a Good Time? | PrairieEcoThrifter.com Fri, 17 Feb 2012 18:55:19 +0000 http://personalfinancebythebook.com/?p=1452#comment-11024 [...] Unsecured loans for smaller amounts of money can help in the short term, but you must make sure you can keep up with the repayments, as penalty fees will only deepen your debt. Relying on loans can lead to the formation of bad borrowing habits. Consider whether you can save money by reducing your monthly spending in other ways before conducting research into the best loan deals available. There are even such things as zero percent loans. [...] [...] Unsecured loans for smaller amounts of money can help in the short term, but you must make sure you can keep up with the repayments, as penalty fees will only deepen your debt. Relying on loans can lead to the formation of bad borrowing habits. Consider whether you can save money by reducing your monthly spending in other ways before conducting research into the best loan deals available. There are even such things as zero percent loans. [...]

]]> By: Joe Plemon http://personalfinancebythebook.com/is-buying-a-new-car-for-zero-percent-interest-loan-a-good-idea/comment-page-1/#comment-10928 Joe Plemon Sat, 11 Feb 2012 22:14:36 +0000 http://personalfinancebythebook.com/?p=1452#comment-10928 Sally, Good point that there are two different topics: new vs used and zero percent vs cash upfront. Obviously, I have a bias toward used, so I would argue to buy used instead of new, regardless of the interest rate of the loan. That was the gist of this post. But hey...if you are in a position to buy new, good for you. Go for it. Myself? I have no debt, I haven't had any debt in years and I wouldn't create debt, even for a zero percent loan. The thought of making monthly payments for five years makes my stomach churn. Sally,
Good point that there are two different topics: new vs used and zero percent vs cash upfront.

Obviously, I have a bias toward used, so I would argue to buy used instead of new, regardless of the interest rate of the loan. That was the gist of this post.

But hey…if you are in a position to buy new, good for you. Go for it. Myself? I have no debt, I haven’t had any debt in years and I wouldn’t create debt, even for a zero percent loan. The thought of making monthly payments for five years makes my stomach churn.

]]> By: Joe Plemon http://personalfinancebythebook.com/is-buying-a-new-car-for-zero-percent-interest-loan-a-good-idea/comment-page-1/#comment-10926 Joe Plemon Sat, 11 Feb 2012 21:59:45 +0000 http://personalfinancebythebook.com/?p=1452#comment-10926 Thanks Alex! Thanks Alex!

]]> By: Sally http://personalfinancebythebook.com/is-buying-a-new-car-for-zero-percent-interest-loan-a-good-idea/comment-page-1/#comment-10870 Sally Wed, 08 Feb 2012 15:44:19 +0000 http://personalfinancebythebook.com/?p=1452#comment-10870 I have done all three. Bought new with cash, bought used with cash, bought new with 0% finance. There are two separate topics. New vs used, and 0% vs cash upfront. If you are short the cash to buy the new car you want, and you are knowledgeable, lucky and don't put a value on your time in seeking the perfect used car, then used can save you 15% or so from a depreciation standpoint - whether you keep the car or sell it after three years. I have done this successfully many times in my youth. Now that I am older and value my time and have the money, I no longer take the risks of a used car. As far as 0% vs cash, 0% is the better deal. Why? Because the argument that you will get a better deal with cash does not have to be. You do not have to discuss how you are purchasing when negotiating price. Get a cash price quote and then switch it to 0% financed - the dealer should not care. He makes the same regardless. The difference is only in the advertised rebates for cash. In most cases they are less than 10%. Some would say that is why they would pay cash, but.. If you have a mortgage (or any other debt) put the money there instead of upfront on a car, you will make more than that one time 10% loss due to cash rebates. or, if you invest in a long term cd you will have the cash on hand and end up paying less for the car over time. Many times you can also get taxes, registration and everything else added to the 0% finance. Go for the five year 0% if you have the credit - it truly is a 0% loan less any cash rebates. the rebates I was offered( at the time I 0% financed) added up to a one time 5.5% discount. I hope to make at least five times that in compounded interest on my money over the next five years. I have done all three. Bought new with cash, bought used with cash, bought new with 0% finance.
There are two separate topics. New vs used, and 0% vs cash upfront.
If you are short the cash to buy the new car you want, and you are knowledgeable, lucky and don’t put a value on your time in seeking the perfect used car, then used can save you 15% or so from a depreciation standpoint – whether you keep the car or sell it after three years. I have done this successfully many times in my youth.
Now that I am older and value my time and have the money, I no longer take the risks of a used car.
As far as 0% vs cash, 0% is the better deal. Why? Because the argument that you will get a better deal with cash does not have to be. You do not have to discuss how you are purchasing when negotiating price. Get a cash price quote and then switch it to 0% financed – the dealer should not care. He makes the same regardless. The difference is only in the advertised rebates for cash. In most cases they are less than 10%. Some would say that is why they would pay cash, but.. If you have a mortgage (or any other debt) put the money there instead of upfront on a car, you will make more than that one time 10% loss due to cash rebates. or, if you invest in a long term cd you will have the cash on hand and end up paying less for the car over time. Many times you can also get taxes, registration and everything else added to the 0% finance. Go for the five year 0% if you have the credit – it truly is a 0% loan less any cash rebates. the rebates I was offered( at the time I 0% financed) added up to a one time 5.5% discount. I hope to make at least five times that in compounded interest on my money over the next five years.

]]> By: Highlights (02.04) | Entreprelife http://personalfinancebythebook.com/is-buying-a-new-car-for-zero-percent-interest-loan-a-good-idea/comment-page-1/#comment-10819 Highlights (02.04) | Entreprelife Sat, 04 Feb 2012 13:02:07 +0000 http://personalfinancebythebook.com/?p=1452#comment-10819 [...] Is Buying A New Card For Zero Percent Interest A Good Idea? — Joe gives his take on a popular car buying tactic. [...] [...] Is Buying A New Card For Zero Percent Interest A Good Idea? — Joe gives his take on a popular car buying tactic. [...]

]]> By: Alex http://personalfinancebythebook.com/is-buying-a-new-car-for-zero-percent-interest-loan-a-good-idea/comment-page-1/#comment-10711 Alex Mon, 30 Jan 2012 22:05:30 +0000 http://personalfinancebythebook.com/?p=1452#comment-10711 Joe, this is probably the best article on the downside of using 0% interest that I have ever read. I will share this with people for years and years. Sad I missed it the first time around, but I'm glad I caught it today! Joe, this is probably the best article on the downside of using 0% interest that I have ever read.

I will share this with people for years and years.

Sad I missed it the first time around, but I’m glad I caught it today!

]]> By: Joe Plemon http://personalfinancebythebook.com/is-buying-a-new-car-for-zero-percent-interest-loan-a-good-idea/comment-page-1/#comment-10202 Joe Plemon Tue, 10 Jan 2012 14:46:44 +0000 http://personalfinancebythebook.com/?p=1452#comment-10202 Bill, Thank you for your well thought out comments. For the reasons you stated, under the conditions you stated them, I agree that there is not much difference between buying new at a zero percent loan or buying new with cash. However, most of my post is a comparison of paying cash for a used car versus borrowing money for a new car at zero percent. I am obviously a huge advocate of paying cash for a used car. One more thing: I re-checked my source of what percentage of millionaires buy new cars...you are right and I am wrong. Whereas 76.5% of millionaires are not driving new cars, only 37% report that their most recent car purchase was not a new car. My bad, and thanks for calling me on it. I will correct my error in the post. Bill,
Thank you for your well thought out comments. For the reasons you stated, under the conditions you stated them, I agree that there is not much difference between buying new at a zero percent loan or buying new with cash. However, most of my post is a comparison of paying cash for a used car versus borrowing money for a new car at zero percent. I am obviously a huge advocate of paying cash for a used car.

One more thing: I re-checked my source of what percentage of millionaires buy new cars…you are right and I am wrong. Whereas 76.5% of millionaires are not driving new cars, only 37% report that their most recent car purchase was not a new car. My bad, and thanks for calling me on it. I will correct my error in the post.

]]> By: Bill from Joisey http://personalfinancebythebook.com/is-buying-a-new-car-for-zero-percent-interest-loan-a-good-idea/comment-page-1/#comment-10199 Bill from Joisey Tue, 10 Jan 2012 13:24:39 +0000 http://personalfinancebythebook.com/?p=1452#comment-10199 Depreciation both immediate and over time are the same regardless of the manner in which you purchase your car. It only factors in if you want to consider a good used car vs new and have somebody else take that initial depreciation hit. Even then you need to recognize the reduced trade in value of a car that is a year or two older when you want to replace that car. Discipline in how much you can afford realisticallly is an aside when concerning financing choices. Discipline in budgeting is the BEGINNING of the car buying process. So taking a zero interest rate loan or paying cash is a moot point if the assumption is there is no discipline in the budget process. If you save money to buy a car in cash, that money might be in a savings or money market account for safety but offer very low investment return. Taking out a zero rate loan, vs paying out a wad of cash, can also be viewed as leaving money in a more rewarding investment over 3-5 years. Sure there are savings and price negotiating leverage in paying cash and doing this is preferable to a long term loan at 4-6%. However, basic initial discipline suggests you negotiate to a price you want and no more BEFORE you commit to a method of paying for the car. Finally, I SERIOUSLY doubt that 70% of the wealthy buy used cars unless you are counting 3rd cars and/or collector cars. The higher end car market would not be as large as it is even in tough times if only 30% of the wealthy bought new. Depreciation both immediate and over time are the same regardless of the manner in which you purchase your car. It only factors in if you want to consider a good used car vs new and have somebody else take that initial depreciation hit. Even then you need to recognize the reduced trade in value of a car that is a year or two older when you want to replace that car. Discipline in how much you can afford realisticallly is an aside when concerning financing choices. Discipline in budgeting is the BEGINNING of the car buying process. So taking a zero interest rate loan or paying cash is a moot point if the assumption is there is no discipline in the budget process. If you save money to buy a car in cash, that money might be in a savings or money market account for safety but offer very low investment return. Taking out a zero rate loan, vs paying out a wad of cash, can also be viewed as leaving money in a more rewarding investment over 3-5 years. Sure there are savings and price negotiating leverage in paying cash and doing this is preferable to a long term loan at 4-6%. However, basic initial discipline suggests you negotiate to a price you want and no more BEFORE you commit to a method of paying for the car. Finally, I SERIOUSLY doubt that 70% of the wealthy buy used cars unless you are counting 3rd cars and/or collector cars. The higher end car market would not be as large as it is even in tough times if only 30% of the wealthy bought new.

]]> By: Selling Your House to Pay Off Debt: Good Idea or Bad? http://personalfinancebythebook.com/is-buying-a-new-car-for-zero-percent-interest-loan-a-good-idea/comment-page-1/#comment-9295 Selling Your House to Pay Off Debt: Good Idea or Bad? Thu, 27 Oct 2011 22:49:06 +0000 http://personalfinancebythebook.com/?p=1452#comment-9295 [...] month until you are confident that you are in control of your money. 2. Get rid of other debt. If car payments are dragging you down, get rid of your car. Give up eating out, vacations and satellite TV until [...] [...] month until you are confident that you are in control of your money. 2. Get rid of other debt. If car payments are dragging you down, get rid of your car. Give up eating out, vacations and satellite TV until [...]

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