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Cash vs Finance - Who does what?

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Old 02-17-2018, 12:40 PM
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HardHitter
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Default Cash vs Finance - Who does what?

I've owned 15-16 cars and always paid cash for them up front. I was taught that if you can't pay cash, you can't afford it. I'd be interested to hear how all of you bought your 991. Right now I have a 997.1TT, which again I paid cash, and deciding on getting into a 991. In this position, would you guys use all of the sale proceeds of the 997 as a down payment for the 991 and finance the rest or just spend the rest of the cash to buy it outright? What did you do for your cars.
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Old 02-17-2018, 01:07 PM
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72offsuit
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Cash, its mine, do I as I please, and enjoy my car.
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Old 02-17-2018, 01:25 PM
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Semitone
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I don't have a 991 TT but do currently own 5 cars. I once tried working out the lease/finance economics in detail but just gave myself a headache with the assumptions. I pay cash for my cars because 1.) I keep them for a long time and 2.) typically don't want to pay the all-in fees and rates to borrow money. I usually have enough uninvested cash that is earning zero to justify a cash purchase.

For me, the financing is an opportunity cost issue. Seems like I never have many opportunities ;( It's like a mortgage. Some people like to think of it as cheap money but if you are sitting on cash, it ain't so cheap.) On the other hand people who have a business and can write off payments might have a different view. Finally, if you are only keeping a car for a few years, leasing might make sense since I think you only pay sales tax on the payments and not on the entire vehicle. Makes getting rid of the car less problematic since you can sell it privately and not feel boxed in on carrying over the tax issue on a trade-in.

Well that's my 2 cents.
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Old 02-17-2018, 01:31 PM
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na94
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'Cash for Cars' is what I was taught. I either own or am partners in several cars, many are race vehicles only. Nothing too expensive though except a 991 GT3. I really only own that thing due to blind luck in real estate, and evem worse it is a track car, so the value could drop to 0 in the blink of an eye. It would hurt, but I need to be able to drop the keys and walk away from it if need be. Can't do that with a lease.
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Old 02-17-2018, 02:15 PM
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HardHitter
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Let me clarify that I would be actually buying the car and not looking for lease options. It is all about, if you were to buy X car tomorrow, would you finance the money and invest that to cover your costs and even profit on it (e.g. borrowing money is 3%, but can invest and get a 6% return) or you just pay it all up front and lose the investing opportunity to have your money make you money.

As I had mentioned, I was always a buy the car in cash and be done with it. I didn't want the hassle of car payments, etc, however when looking at more expensive cars, it may be better to finance.

For example, you spend $100K on a car and that money is lost. If you finance that $100K for 60 months @ 3%, total cost to borrow that money is $7,812 spread across 5 years. However, if you put that $100K in an investment that returns 6% year-after-year, your potential income is $34K income less your investment tax and the $7.8K cost of the loan.

So in short, you get your car and make $25K by keeping the money instead of paying it up front
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Old 02-17-2018, 05:53 PM
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9 cars total
3 are daily drivers (wife’s car, my car and suburban - all bought new). Don’t think much about it but looking back have always bought daily driver new cars via finance with healthy down payments
6 fun/collectible cars bought used (some 20+ yrs old) and all of those were paid with cash even though some of those were more expensive than the daily drivers. Guess I look at those as, if I don’t have the money for the toy, I don’t start looking for the toy
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Old 02-17-2018, 06:04 PM
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Generally cash.
However I think the statement if you cant pay cash you cant afford it is ridiculous. Different ways to skin a cat and you can argue all day about investing the money and do better than the interest rate you are paying on a car loan. Really has nothing to do with affordability.
Personally for me I just like the mental effect of not having a car payment. Certainly not a question of being able to afford it or not.
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Old 02-17-2018, 06:49 PM
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Seems like it’s different strokes for different folks. I can afford to pay cash but choose to put a fair amount down at sale and use the low rates to keep my money invested.
Went through a tumultuous divorce about 15 years ago and paid heavy alimony for several years. As I re-accumulate I still want to drive Pcars which I did before the Word War. I am comfortable I can pay off the cars at any time if needed to and won’t have to eat cat food. Remarried to a wonderful woman and just bought our 2nd home in Florida.
I think the comments of “if you don’t pay cash you’re a poser” is not the case for all.
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Old 02-17-2018, 07:37 PM
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It's different every time. Car loans are around 3% at the moment, and money is worth more to me than 3%, so I have no problem financing a major part of some cars. The "if you can't pay cash, you can't afford it" is great if you like that piece of mind. If you know your cashflow and are fine with a payment, then do it. There is no right answer, but there is also no wrong way to do it except a very expensive lease that you can't get out of if the poop hit the fan.
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Old 02-17-2018, 09:33 PM
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Originally Posted by HardHitter View Post
Let me clarify that I would be actually buying the car and not looking for lease options. It is all about, if you were to buy X car tomorrow, would you finance the money and invest that to cover your costs and even profit on it (e.g. borrowing money is 3%, but can invest and get a 6% return) or you just pay it all up front and lose the investing opportunity to have your money make you money.

As I had mentioned, I was always a buy the car in cash and be done with it. I didn't want the hassle of car payments, etc, however when looking at more expensive cars, it may be better to finance.

For example, you spend $100K on a car and that money is lost. If you finance that $100K for 60 months @ 3%, total cost to borrow that money is $7,812 spread across 5 years. However, if you put that $100K in an investment that returns 6% year-after-year, your potential income is $34K income less your investment tax and the $7.8K cost of the loan.

So in short, you get your car and make $25K by keeping the money instead of paying it up front
Given your hypothetical, no one would ever pay cash. Unfortunately the $100K that you reference could become $90K in five years. OTOH if you know of some investment that will guarantee a 6% annual return, please let me know because I can easily borrow a significant amount of money at 3%.
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Old 02-17-2018, 11:39 PM
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DJ23
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I don't believe in leasing. I like to own my car at the end without taking a financial hit. I've paid cash and financed. Owned all my cars purchased within 3 years financing. This works for me. Rather invest the remaining balance and benefit from that.
This past TTS I paid well over 2/3 of the car with cash, financed the remaining amount for 3 years. Did automatic payment. Out of sight that way. If needed I can pay off any time, but once again I'll take that balance and
invest it. I got a 2.69% rate from my Dealer because I put so much down. It was an easy decision to make. I could never bring myself to lease knowing that in order to own the car I would take a big hit at the end.

Jay

Last edited by DJ23; 02-18-2018 at 10:15 AM.
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Old 02-18-2018, 08:27 AM
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I buy my cars and pay cash, they are toys and I don't keep them long enough to grow attached, of course if a manufacturer that I am interested in offers ZERO percent, I will take that deal any day.
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Old 02-21-2018, 10:59 PM
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JD911
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Cash money.
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Old 02-22-2018, 02:46 PM
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The reason why opinions are all over the lot on this issue is that the decision is influenced not only by purely logical objective financial analysis but also by emotion. On a purely logical basis, quite simply, as we all know, if you can finance at an interest rate that is lower than the net rate of return you can realize on your money, it makes sense to finance as much of the purchase price as possible (there are other factors relating to your own financial needs and intentions that matter, as well, of course). That having been said, for emotional reasons, despite the objective facts to the contrary, I bought my TTS outright, cash up front; it's only the second time in my decades of driving that I've done that. I knew that it wasn't wise financially -- but I also knew, and most importantly felt, that it was satisfying emotionally. So, assuming you at least have all the facts you need about financing, there is no single right answer.
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Old 02-22-2018, 03:14 PM
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While the long term average of investments may be 7% or more, but in any 5 year period, it could be much worse. So if you want to finance in order to invest, have at it, but its a risk. I tend to prefer to buy in cash. Tried a small loan once, and couldn't deal with making payments, so I paid the balance after a year.
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