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Why buying a car with cash makes cents

Buying a car can be one of the easiest things you will do. Why? Because dealerships LOVE walking you through the ultra easy process of obtaining a new car loan. They have their own financing departments and everything. It makes the process seamless and quick. Plus they can help you find a car that suits your payment preferences. Did I mention they have no problem buying your old car from you? So…. why should I buy a car with cash if they make it so easy for me? Not to mention, I don’t have $30,000 to drop on a new car.

Why paying cash makes sense

  1. Paying in cash helps you avoid paying interest
  2. Emotional and financial strain in the event of a job loss or inability to pay
  3. It’s a little easier when buying and selling privately
  4. Cool factor. Let’s be real: handing over a $28,000 check can make you feel like a king
  5. The “I worked for it” factor

Why paying cash for your car is a dumb idea

  1. If the interest rate is 5% but you choose to invest the money you would have dropped on a new car in stocks yielding 8-12%, well, which one is higher? If the money can work harder for you in hand than it can by purchasing outright, then you shouldn’t buy a car with cash.
  2. You opt to pay with cash that isn’t yours. Borrowing from family for a car can strain relationships. It is better to avoid this.

Cars are typically not a good investment. In fact, calling them an investment at all seems a little inappropriate. But there are times when it makes sense to buy a car with cash and times where it makes more sense to make the monthly payment.

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