5 ms·

They've been low for a while now too. As annoying as it is to have a $670 car payment each month, you really can't beat 0% interest on a $40k loan. Especially

They've been low for a while now too. As annoying as it is to have a $670 car payment each month, you really can't beat 0% interest on a $40k loan. Especially in a market where the average monthly return on $40k in stocks has been pretty substantial.

stefan_ 6y ago
Except for the part where $0 down, 0% interest loan make people go for the 40k car they don't need instead of the 25k one.
- mywittyname 6y ago
  That's really neither here nor there. The discussion was more about transforming, "save up and pay cash" to "save up and get a loan anyway because interest is so cheap." I picked $40k because that's roughly the median price of a new car. Whether your going for a $25k car, or a $125k car, the advice is the same: get a low-interest loan.
heisenbit 6y ago
0% loan on the sticker price. The goal of coming in with cash is to get as far as possible below the sticker price.
- dntrkv 6y ago
  Dealers don't care whether you pay cash or finance. Just call around dealers within a certain mile radius you are willing to drive and find the best deal. This has been, and will always be, the best way to get a deal.
- giaour 6y ago
  Don’t dealerships make a good percentage of their profits from finance charges? The last time I bought a car, it took an hour of cajoling to get the cash price of a three year lease
  - giobox 6y ago
    Absolutely. To take Ford as an example, It’s not that huge an exaggeration to suggest Ford manufactured cars with virtually no profit margin to help sell profitable loans via its Ford Credit arm at various times in its recent history, rather than providing loans to help sell the cars at profit. Ford Credit is a huge part of Ford’ overall business.
- chrisseaton 6y ago
  This is a really common misconception that buyers have. Just stop and think for a second - put yourself in the dealer's shoes - why do you think the dealer would want cash? No reason. They don't want your cash. A cash buyer is a pain. They want to sell you a loan. The last time I bought a car I offered cash, and they countered with a four-figure discount (on total cost of ownership) if I took part of it as a loan. I now have that part of the price invested, creating money, while I gradually pay the loan. And my credit score went up as I had a new, responsible loan! Cash buyers are fools, unless you're really at the point of valuing not having a loan for moral reasons (maybe a German?) at four-figures.
  - SilasX 6y ago
    Yes, and the smart move there is to take the offer and pay it early, which is still stupid on the dealer's part.
    - throwawayboise 6y ago
      Assuming you can. Some deals are set up so that you have to pay most of the interest even if you pay the loan off early, or other prepayment penalties.
      - SilasX 6y ago
        Yes, prepayment penalties are a thing. But every time this comes up, we see reports of too-good-to-be -true deals that don't have them. See, for example, this thread: https://news.ycombinator.com/item?id=14484615 https://news.ycombinator.com/item?id=14484615 I also had a friend do exactly what I described, and there was another thread where they only had to make two payments and then could pay off the rest without penalty (and even that was an unspoken gentlemen's agreement with the dealer) -- will find if I get a chance. The point is, it's simply not warranted to assume as a bedrock of truth that no dealer every makes a confused deal in this respect, as chrisseaton was insisting.
  - throwawayboise 6y ago
    And if you had walked out the door they would have run after you to take the cash deal AND given you the discount. You think they prefer to deal with the time and uncertainty of putting you through a loan application, when they could pocket the same sale in cash? Nobody is coming out with less money on a loan purchase vs. cash, except the buyer.
- nradov 6y ago
  It's actually the opposite. Most franchise dealers get incentives for financing through the manufacturer's captive lender, so you can often negotiate a slightly better deal by taking a loan.
- ineedasername 6y ago
  One offer I was looking at recently was 0% OR $4k cash back off the MSRP. The interest rate on taking the cash back offer ended up working out to near exactly $4k. Though if you have good credit and went through a credit union you could probably get a much better rate.
throwawayboise 6y ago
You lose all of that and more on depreciation in the first two years. I buy older than most people; currently my newest car is a 2009. I do maintenance and routine repairs myself, and I lose almost nothing on depreciation. But you can still come out ahead by buying 4-6 years old and letting the original buyers take the bulk of the depreciation losses.
- stjohnswarts 6y ago
  For me the sweet spot has been 5 years old and < 60K miles, usually cars with that description haven't been run into the ground. Currently driving a mustang with 200K miles on it and it still runs like a sewing machine. It's harder now though, pandemic has really driven up used car prices, makes more sense to buy new currently, especially if you're getting something like a honda or toyota that holds value.
- daniellarusso 6y ago
  Not anymore. Car market is a bit strange right now. Check the price on your 2009 on eBay or craiglist. Is it worth more than you think it should be?
- underwater 6y ago
  I don't think this is a blanket rule. Sometimes 2-4 year old cars can be the same price as a new car. This seemed to happen after the GFC crash.

stefan_ 6y ago

Except for the part where $0 down, 0% interest loan make people go for the 40k car they don't need instead of the 25k one.

mywittyname 6y ago
That's really neither here nor there. The discussion was more about transforming, "save up and pay cash" to "save up and get a loan anyway because interest is so cheap." I picked $40k because that's roughly the median price of a new car. Whether your going for a $25k car, or a $125k car, the advice is the same: get a low-interest loan.

heisenbit 6y ago

0% loan on the sticker price. The goal of coming in with cash is to get as far as possible below the sticker price.

dntrkv 6y ago
Dealers don't care whether you pay cash or finance. Just call around dealers within a certain mile radius you are willing to drive and find the best deal. This has been, and will always be, the best way to get a deal.
giaour 6y ago
Don’t dealerships make a good percentage of their profits from finance charges? The last time I bought a car, it took an hour of cajoling to get the cash price of a three year lease
- giobox 6y ago
  Absolutely. To take Ford as an example, It’s not that huge an exaggeration to suggest Ford manufactured cars with virtually no profit margin to help sell profitable loans via its Ford Credit arm at various times in its recent history, rather than providing loans to help sell the cars at profit. Ford Credit is a huge part of Ford’ overall business.
chrisseaton 6y ago
This is a really common misconception that buyers have. Just stop and think for a second - put yourself in the dealer's shoes - why do you think the dealer would want cash? No reason. They don't want your cash. A cash buyer is a pain. They want to sell you a loan. The last time I bought a car I offered cash, and they countered with a four-figure discount (on total cost of ownership) if I took part of it as a loan. I now have that part of the price invested, creating money, while I gradually pay the loan. And my credit score went up as I had a new, responsible loan! Cash buyers are fools, unless you're really at the point of valuing not having a loan for moral reasons (maybe a German?) at four-figures.
- SilasX 6y ago
  Yes, and the smart move there is to take the offer and pay it early, which is still stupid on the dealer's part.
  - throwawayboise 6y ago
    Assuming you can. Some deals are set up so that you have to pay most of the interest even if you pay the loan off early, or other prepayment penalties.
    - SilasX 6y ago
      Yes, prepayment penalties are a thing. But every time this comes up, we see reports of too-good-to-be -true deals that don't have them. See, for example, this thread: https://news.ycombinator.com/item?id=14484615 https://news.ycombinator.com/item?id=14484615 I also had a friend do exactly what I described, and there was another thread where they only had to make two payments and then could pay off the rest without penalty (and even that was an unspoken gentlemen's agreement with the dealer) -- will find if I get a chance. The point is, it's simply not warranted to assume as a bedrock of truth that no dealer every makes a confused deal in this respect, as chrisseaton was insisting.
- throwawayboise 6y ago
  And if you had walked out the door they would have run after you to take the cash deal AND given you the discount. You think they prefer to deal with the time and uncertainty of putting you through a loan application, when they could pocket the same sale in cash? Nobody is coming out with less money on a loan purchase vs. cash, except the buyer.
nradov 6y ago
It's actually the opposite. Most franchise dealers get incentives for financing through the manufacturer's captive lender, so you can often negotiate a slightly better deal by taking a loan.
ineedasername 6y ago
One offer I was looking at recently was 0% OR $4k cash back off the MSRP. The interest rate on taking the cash back offer ended up working out to near exactly $4k. Though if you have good credit and went through a credit union you could probably get a much better rate.

throwawayboise 6y ago

You lose all of that and more on depreciation in the first two years. I buy older than most people; currently my newest car is a 2009. I do maintenance and routine repairs myself, and I lose almost nothing on depreciation. But you can still come out ahead by buying 4-6 years old and letting the original buyers take the bulk of the depreciation losses.

stjohnswarts 6y ago
For me the sweet spot has been 5 years old and < 60K miles, usually cars with that description haven't been run into the ground. Currently driving a mustang with 200K miles on it and it still runs like a sewing machine. It's harder now though, pandemic has really driven up used car prices, makes more sense to buy new currently, especially if you're getting something like a honda or toyota that holds value.
daniellarusso 6y ago
Not anymore. Car market is a bit strange right now. Check the price on your 2009 on eBay or craiglist. Is it worth more than you think it should be?
underwater 6y ago
I don't think this is a blanket rule. Sometimes 2-4 year old cars can be the same price as a new car. This seemed to happen after the GFC crash.