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Car Forum / Saab Cars / September 2005Financing vs. buying for cash
If you have the $20,000 (US) or so to spend on a new car is it wiser to buy the car for cash or take out a loan? One salesman advised me it is better to get a loan so you pay less for the car upfront in case it is in an accident as the insurance will only pay up to the current value of the car as used/depreciated. Was he just saying that to sell me a loan or does it make real world sense? > If you have the $20,000 (US) or so to spend on a new car is it wiser to buy > the car for cash or take out a loan? Interest rates are very low right now; if you can make more money on that money than you'll pay in interest, you come out ahead. That's rarely if ever the case, though. > One salesman advised me it is better to get a loan so you pay less for the > car upfront in case it is in an accident as the insurance will only pay up > to the current value of the car as used/depreciated. Was he just saying that > to sell me a loan or does it make real world sense? Insurance pays you for your loss, regardless of what you owe. So, I think you need to find a better sales weasel. Just because a car is totalled, also, doesn't mean you don't still owe for the full loan amount, so he's doubly full of it. That said, 20 grand won't get you much of a brand new car; consider buying a 3-year lease tradein for the most bang for your buck. But, avoid that salesman. Dave Hinz >> If you have the $20,000 (US) or so to spend on a new car is it wiser to >> buy [quoted text clipped - 20 lines] > buying a 3-year lease tradein for the most bang for your buck. But, > avoid that salesman. Well, I was thinking 20 grand after trade-in, incentives/discounts, etc. Thanks for the reply. > If you have the $20,000 (US) or so to spend on a new car is it wiser to buy > the car for cash or take out a loan? > One salesman advised me it is better to get a loan so you pay less for the > car upfront in case it is in an accident as the insurance will only pay up > to the current value of the car as used/depreciated. Was he just saying that > to sell me a loan or does it make real world sense? Pay cash. Reduce insurance (aka extortion). Come out ahead no matter what heppens.  Signature-Fred W Toys for sale, Hey get your toys here: <http://users.adelphia.net/~fredwills/> > If you have the $20,000 (US) or so to spend on a new car is it wiser to buy > the car for cash or take out a loan? > One salesman advised me it is better to get a loan so you pay less for the > car upfront in case it is in an accident as the insurance will only pay up > to the current value of the car as used/depreciated. Was he just saying that > to sell me a loan or does it make real world sense? It's a toss up really, you're screwed either way. Financially the obvious best choice is to buy a car that's at least a year or two old and let some other sucker take the big depreciation hit, of course if it just has to be a new car you can probably afford it either way so go with whichever is more convenient. >> If you have the $20,000 (US) or so to spend on a new car is it wiser to >buy [quoted text clipped - 11 lines] >course if it just has to be a new car you can probably afford it either way >so go with whichever is more convenient. We used to use a 33% loss just to drive the car off of the lot and another 25 % after a year (to the end of year two. This was a good general figure. Is this still the same? +/- al little? This brings you to a depreciated value of 50% of sticker price. for a two year old vehicle which has probably 60 to 70 k miles and two years on the warranty which has always been a good deal for me. The only way to get reasonable depreciation is to maintain and run the car well for seven or eight years but this still does not make sense with a two year old kept for five or six years. You can do a lot of looking for the Saab of your dreams for $25 to 30k. Malcolm Buy used. If you're in the US, there's a company in Atlanta that specializes in selling Saabs off-lease. http://www.saabway.com $20,000 will buy a lot of Saab from them even if you've got to fly there to pick it up or have it shipped. |
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