Financing a car or paying in cash?

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“If you can afford to pay for a car in cash, would you still go for financing? This question has been the source of serious and sometimes heated discussions for years. In fact, the last time we asked you about the best car buying advice you’ve ever received, this debate about finance versus money arose.

Frankly, however, there is no definitive answer to this. As we have said many times, there is several factors to consider when buying a new car. You can only make the best decision based on your current financial situation, and what works for you may not work exactly for others.

So to better understand the matter, we went ahead and asked you what you think. Unsurprisingly, the responses were mixed. Lots of people have given great advice on why financing would make more sense in the long run, even if you are liquid enough to pay cash. Some readers, on the other hand, strongly advised against financing a vehicle.

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Overall, we got a lot of sensible answers, many of which we’re sure will be able to help other readers who are currently on the hunt for a whole new car. We’ve listed a few of them below.

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Cash payment financing:

“I won’t pay cash even if I can afford it. Here’s why.
“Think of a car as a utility. It’s a basic expense like Meralco. You can pay a monthly amount of X without having to shell out the stored money. You don’t want to pay Meralco, Globe and Maynilad £ 1million up front 10 years in advance, do you?
“Save it for a rainy day. I understand the point, but see it as a bonus to keeping your cash handy and enjoying the luxury of experiencing a whole new car. always did this for my previous cars.
“And just in case you want to stop the monthly payments, hey, you still have that money stashed away, right?” – Sieg Téo

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“Never put all your eggs in one basket. If you pay half the price for the down payment and the other half to invest in another income-generating activity, you will be able to afford the monthly payment and hopefully have more for other purposes. . – Carmelo Gaité

“If you are not very liquid and the money you have will earn more than the interest you will pay the bank for the loan, then absolutely take a loan for it.” – Rohn Ramirez

“Normally, even if I have the cash, this would still be based on several factors such as the estimated depreciation rate of the car over time versus the interest rate of the finance available, whether for use professional or strictly personal. But, in my current personal situation, I would more than likely want to pay cash because I wouldn’t want to burden my loved ones with the remaining payments if I get started, so to speak, a little too early. – Marlon B. Boone

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“More funding. It’s a privilege for us who have a good credit rating, so why not take advantage of it? I can always use my extra money for other priorities. [Just because] you can, [doesn’t] means you should. – Ron Ace

“If I can use the money to earn for depreciation. In a few years I [would] I still have my manager and a car. – Joël Audrey Ramos

“I prefer to invest the money in a ship / income-generating business that would pay the monthly depreciation of the car. This way I can keep my money and the car. – Van Jo Pineda

“It is almost certain that one should be able to find an investment that beats the cost and interest of the financing. Do the math (Excel is love) and it will help to decide. Then again there are people who don’t like the feeling anywhere. – Paolo Ylagan

“It depends. I can ask myself if I am sure I have an asset that will outperform the interest rate and give me a high return on my investment within five years. -Jessica Fernandez

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“If you know how to make your money grow, the financing is better. By buying cash you are using your own money, while in finance you are using money from the bank to buy a vehicle. The vehicle and your remaining cash can be used for business or other investments, and then pay off the monthly loan from the income generated by the business later. Another thing is that your credit score will increase if you can complete your loan, so you can leverage more of the bank’s money to start another business or buy an asset. -Miko Ebdani

“Not with a car, but with a big bike. I explored my options: dealer loan, bank loan (then pay the unit in cash), and cash.
“The interest rate on the bank loan was so low that it made more sense to take out a bank loan than to pay the dealer in cash. Not only did I save over half compared to a loan from a normal dealer, but I also had the opportunity to boost my credit rating. And I still have money for other needs (especially in an emergency pero wag naman sana). “ – Ruemer Santillan

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“If the interest is acceptable, yes. Cash flow is king. Only those who do not understand it choose to pay in cash … ” – Arafat Pokaan

Cash Payments on Funding:

“Of course not. The only time you buy on installment is on real estate, not on something that depreciates the moment it comes out of the dealership. Unless you’re going to use it commercially, that is. is for business. – Joaquin Jhay Bufi

“Let me outline some knowledge. This is how I do it. You pay it in cash and then finance it with the bank. You’ll get a discount from the dealership and lower rates from the bank of your choice. I usually keep it for two years or less as well and get a 3% AP rate. Shop around the banks and get a rate and deal in hand before you buy. Of course, you don’t fund the entire amount too. Make a maximum of 80% of the amount financed. – Ulysses Jean

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“I prefer to pay in cash if I can afford it. Iba peace of mind kapag fully paid rather than monthly may inaalala for a few years. “ – Nachie Cabantog

“If everyone has the riches and the opportunity, always pay in cash. The cost is less than paying by financing. No monthly worries, then focus more on others [productive] things.” – Gj Abaigar

“I prefer to pay in cash if I can afford it. Why would I enrich my car dealership if I could save the interest for myself instead? “ – Cay Lang

“Cash. Pero more importantly, you have to buy a garage before you buy a car. – Cheryl Gatdula

“The car depreciates. You pay cash on things that depreciate and make installments on real estate. “ – Hannah Mae Sibul

“People always have the false feeling that business will always give way to income. It’s not-[there] there are fifty-fifty chances of getting there or losing everything … “ – Ed Gar

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“Because the banks here are major causes of headaches, cash all the way! We have learned the hard way … our complainant group now has 300 members. – Kathy Choy Ranoa

“Let’s exaggerate the numbers a bit: I’m buying a car for 10 million pesos. The deposit is 20% and the balance is 8 million pesos. The monthly amortization is P 173,000 per month on the loan. This amounts to P10.3 million for the 60-month term, so P2.3 million in interest.
“So the question is, are you okay with saving 2.3 million pesos over 60 months? Do you have any other use? What if you had a business opportunity that can generate 15% per year (don’t even dial it)? Your P8 million can earn P1.2 million per year. So in two years you could easily have recovered the interest charges and made a profit of 3.6 million pesos. – Kevin Carréon

Have any other related tips you’d like to share? Please feel free to participate, the comments section is open at any time.

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