Quote:The idea is planning and saving.  Think you might want to buy a large ticket item such as a vehicle, home, etc.?  The best thing to do is save up money for it.  If you don't quite have enough to cover the purchase, at least have enough to cover the depreciation of it (in this case of a vehicle).  Then if you do need to finance the balance, a credit union will typically offer better rates and/or payment options.

 

One thing that I did that floored a dealership one time.  They offered a discount on a vehicle ONLY if you used their financing.  Let's just say that the vehicle cost after the discount was $35,000.00.  I wrote them a check for $28,000.00 as a down payment and told them that I wanted to finance the remaining $12,000.00.  Of course, I paid the "loan" off when the first payment came due.  The figures are just an example and not the actual figures that we dealt with.

 

One other thing that I advise against.  NEVER pay for credit life and/or gap insurance on a vehicle and NEVER pay for the "special coating" or extended warranties that they offer.

 

Paying things off in cash is obviously the ideal way to go, but a lot of people don't have that luxury for big ticket items, even with planning.

 

With money being so cheap to borrow and interest rates so low recently, the argument could also be made that you could get a higher ROI doing other things with your cash than purchasing something outright, especially with something as low as automotive interest rates.

 

If I have $65,000 cash in the bank and want to purchase a new car, am I better off buying it outright than borrowing the money at 2.x% and picking up a cheap rental property or throwing it in the market and maybe getting a 6% return on it?

 

Sure, nothing can ever replace the peace of mind of not owing anybody anything, but there are different options based on your goals.

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