Why You Should Finance Your Car (And Not Pay Cash)

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Doug DeMuro

Maand geleden

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Yes, it's true: you should probably finance your next car, and not pay cash. Today I'm explaining why it often makes more sense to finance your car, and not pay cash -- and I'll explain the scenarios where I think financing a car is better than paying in full.

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Reacties
MiketheYung God
MiketheYung God Dag geleden
Don't show this to Dave Ramsey.
Mr. Solo Dolo
Mr. Solo Dolo Dag geleden
It all boils down to preferences…what’s best for you and depending on your situation. In My current situation my credit score is over 800 so my next car is going to be cash ..about 30k on a nice luxury used but still new with less miles and I’ll be just saving up for maintenance on it.
Gus Wagner
Gus Wagner Dag geleden
Dave Ramsey hates this
Gerson Rendón
Gerson Rendón Dag geleden
In Mexico an interest rate of 11% is considered low, therefore financing a car here is always a stupid move. There are exceptions with cheap cars like the Chevrolet Spark that that can be financed with 0% interest if you put down 25% of the cost of the car, but that is a pretty crappy car in itself that will loose half of its value in three years and to top it all of, they will give you a lil "discount" if you pay cash so it really isn't 0% interest in the end. All of that doesn't stop everyone from buying new SUVs putting down only 10% of the cost, with a 13% interest rate, paying more than 1/3 of their salary monthly for 5 or 6 years lol. They'd still be looking down on you for driving a 10 year old car.
BV
BV Dag geleden
*THANK YOU DOUG FOR THIS* - you have no idea how much I hate these so-called "financial experts" who are idiots
Kayden Dowdy
Kayden Dowdy 2 dagen geleden
my interest on my car loan is 27%
Maximus Augustus
Maximus Augustus 2 dagen geleden
I bought my Ducati motorcycle with 0% and my Subaru with 1.9%.
ball4life850
ball4life850 2 dagen geleden
I don't have anything better to do then to listen to this.
kuhataparunks
kuhataparunks 2 dagen geleden
TLDR put some money into a car and the rest in stock market, stock market returns will be more than the cash put into the car
2BUnphettered
2BUnphettered 2 dagen geleden
Doug!! You paid $70k for a vehicle that has a chronic sunroof problem and periodic check engine light?! 😳 Hoovie! Where are you?!! 😅
chancegoondavis
chancegoondavis 2 dagen geleden
You should mention your %1.99 is variable its impossible to get a fixed rate that low in a year that interest rate will spike considerably
PersistentIllusion
PersistentIllusion 3 dagen geleden
Duh, hilariously low interest rates today aren't anything like the past. The market is up and you made money? but then you pay fees and taxes, so not always the bargain it seems like
Peter is Googling
Peter is Googling 3 dagen geleden
if...if...if...if.... that is all we hear.
Blake Hudson
Blake Hudson 3 dagen geleden
Most hardcore financial types also wouldnt spend $70k on a car. They would also argue the depreciation hit would counter the savings on financing.
Mohammed Lasheen
Mohammed Lasheen 3 dagen geleden
This is how we do it in Egypt no one basically buys with cash👍👍👍
Durbany
Durbany 3 dagen geleden
there is nothing more important than having peace of mind... rich or poor
chris bean
chris bean 3 dagen geleden
It’s not easy to get a loan when they lay you off from the corona. I had to pay all in full because my old car was crapping out.
Jean Gagnier
Jean Gagnier 4 dagen geleden
Another way to look at it: the more you filter your opportunities, the more likely you are to filter out the best ones. Refusing to get into debt has a cost. If you're ready to pay that expense, more power to you, but being debt-free isn't necessarily financially savvy.
Nasryth Funes
Nasryth Funes 4 dagen geleden
What da dog doin
Joseph
Joseph 4 dagen geleden
Most people can't control themselves when it comes to over extending and over reaching. Not everyone has that discipline. We also seem to forget that all the reasons for the collapse of 2008 are present today and multiplied in fact by a lot. And here's an unpopular opinion but rooted in fact as time will indeed tell: all major Abrahamic religions have forbidden dealing with interest based debt. There always was and will be decrease in debt and their is increase in charity, despite what your mind or the pundits tell you. I got out of the vicious debt cycle long ago and have never been happier. I am smart with my money and have 3 decent cars that I paid for cash. Sorry Doug. Can't agree with you on this one.
ThatTannerGuy
ThatTannerGuy 4 dagen geleden
Bought my car at 3.999% then refied down to .99% saved me $1,000. Plus yeah... Opportunity costs!!! Made way more by investing that cash vs paying off my car
ThatTannerGuy
ThatTannerGuy 4 dagen geleden
Finance your car, use the money to buy a house. An appreciating asset.
Qunia
Qunia 5 dagen geleden
Financing my cars is probably what I would have to do to buy any sort of car i want. Looking at cars such a the 8-series, and which costs like 115K-€ base, which I’ll probably never be able to afford and maintain realistically.
No u
No u 4 dagen geleden
You're the exact kinda guy that should NOT finance your cars. If you can't afford to pay cash for the car don't get it. Doug's point is that, IF YOU CAN PAY CASH, finance it so you can invest the extra cash and make profit (yet he forgets to mention that you pay taxes on market profits so a 6% roi turns into less than 4%) Why do you want an 8 series anyways?
William Savary
William Savary 5 dagen geleden
I think paying with Cash is better for low amount cars, such as below 15k. But beyond that, of course if you can get really good interest rates you're better off invessting
William Savary
William Savary 5 dagen geleden
It can* be a good idea.It is not a good idea if you do not make a ton of money and that the financing is making you live paycheck to paychekck
Michael Gill
Michael Gill 5 dagen geleden
So you would still have debt on a depreciating assett and the rest of your money is tied up in a volatile market?
puddum
puddum 5 dagen geleden
doug kiyosaki
Peter Tingley
Peter Tingley 5 dagen geleden
So does that mean I can pay with pennies?
Afsheen Freestyle
Afsheen Freestyle 5 dagen geleden
This advice is for people that have 70k in cash burning a hole in their pocket, not a 21 year old fresh out of school :)
Istvan
Istvan 5 dagen geleden
I would never, I said NEVER finance my car. It is a DUMB idea af.
Eric Lane
Eric Lane 5 dagen geleden
Based on your logic, you should have financed the entire cost of the car. Your argument literally only works with hindsight that short term the market did well. There are obviously periods in history, especially short term, where the market doesn't go up.
Tanner Tabbutt
Tanner Tabbutt 5 dagen geleden
Doug, Great video! hope someone out there was listening.
paldri
paldri 6 dagen geleden
Taking on debt is just a took in the skillset of acquiring wealth. I recently bought a truck. Could I have paid cash? Sure. Makes far better sense to pay off 1/2 of it and finance the other half at 2% though.
Mario Santos
Mario Santos 6 dagen geleden
Skip to 5:00 mark if you want to hear his reasons without a 5 minute windup
mbb21
mbb21 6 dagen geleden
So effectively what you’re doing is taking a loan and investing the money on the stock market. There’s no need to involve a car in this scheme.
Richard Bamforth
Richard Bamforth 6 dagen geleden
Great advice Doug. However, if you want to lose money, then buy a car. That said, the best time to buy is when the car is about three years old. A friend last week bought a 3 year old Jag XJ. New price three years ago = £75k. He paid £30k with only 24k miles on the clock. That means its depreciation over three years was 60%. Incredible fall in value however, we know that Jags do not retain their value. Beautiful car nevertheless. Keep up the great work Doug.
MMalecke
MMalecke 6 dagen geleden
This is the absolute worst argument ive ever seen someone try to make.
MMalecke
MMalecke 6 dagen geleden
Have debt, and gamble the money you do have!
John Midwest
John Midwest 6 dagen geleden
Your whole argument (6:20) is that the stock market always goes up. I think that's a foolish assumption
Lane
Lane 6 dagen geleden
noodle is lookin quite spiffy
A. Freeman
A. Freeman 6 dagen geleden
Backup cameras have done nothing for safety except make people pay even less attention backing up. They're not a safety feature, they're safety theater.
Anton Kovalov
Anton Kovalov 7 dagen geleden
Should i finance a used one? Considering that it’ll be braking while still paying off the debt
Zolar Zen Drew
Zolar Zen Drew 7 dagen geleden
what da dog doin?
Dima Hich
Dima Hich 7 dagen geleden
that's a bit risky to invest in stocks while indebted
ThatTannerGuy
ThatTannerGuy 4 dagen geleden
He's worth a couple million dollars lol he'll be just fine
Adam Dominguez
Adam Dominguez 7 dagen geleden
lol nah I’m good
mrfireclaw
mrfireclaw 7 dagen geleden
When did your car show become a financial adviser l
John Franco
John Franco 7 dagen geleden
I'm not going to lie, when the dog disappeared I fast forwarded to see if he popped back in.
Jimmy Cain
Jimmy Cain 8 dagen geleden
I don’t finance anything that’s for the suckers.
ihatezgoogle
ihatezgoogle 8 dagen geleden
Uhhhh what is the point of this video?
Peter C
Peter C 8 dagen geleden
best financial advice : buy 4-5 years old Japanese reliable car at 50%-60% off MSRP sell before it starts to require some major services at 7-9 years, works for me just fine. resell value almost same as purchase price
No u
No u Dag geleden
@Peter C damn. How many miles and what year?
Peter C
Peter C 2 dagen geleden
@No u bought 70K lexus gx for 30K which is more than 50% off MSRP.
No u
No u 4 dagen geleden
Good luck finding a car at 50% MSRP that's even 10 years old... Unless it already has 150k miles
vap0rtranz
vap0rtranz 8 dagen geleden
1 caveat: people who go into debt forget their obligations, and spiral into indebtedness. Classic example is credit card death spiral: charging until card is max'd out and then opening a 2nd credit card to pay off the 1st, etc. Otherwise Doug is right: take leftover $ and invest it _if_ net returns exceed compound loan interest; don't just buy depreciating assets with cash..
Thinamo
Thinamo 8 dagen geleden
Finance your car instead of paying cash... BUT FIRST: Check out cars and bids where you bid on cars that you buy with cash
ً
ً 8 dagen geleden
At 4:53 he starts to get to the point of this video. Don't waste time watching anything before that
Thomas Fox
Thomas Fox 8 dagen geleden
He’s really saying the same thing as the “budget types”. His strategy only applies if you could otherwise afford to pay cash… but here we invest instead to get the return and negate the finance charges. People that live paycheck to paycheck… you have NO BUSINESS financing a car.
Thomas Fox
Thomas Fox 4 dagen geleden
@Rj Diggs and now we all know why your paycheck to paycheck 🤦‍♂️ “Lucky” lol 😂
Rj Diggs
Rj Diggs 4 dagen geleden
I live pay check to pay check and I pay $138.83 by weekly. Of course the car is used but the last owner took good care of it so I guess I’m lucky.
Léo Lévesque
Léo Lévesque 9 dagen geleden
i love doug
Ben Zemanek
Ben Zemanek 9 dagen geleden
10 year finance on a $3000 2005 Corolla? You got it Doug!
Nick DeBone
Nick DeBone 9 dagen geleden
Solid video Doug!
bmitchely
bmitchely 9 dagen geleden
Doug (A Millennial) is giving the same advise of my Dad... We, as a society, will be fine :)
Ud73heih Jd8du3hdid
Ud73heih Jd8du3hdid 10 dagen geleden
It's very simple, you need money to make money. When you buy a car outright, you no longer have the money to make money. The only question is, can you finance lower than 9% (the average stock market return)?
Frank
Frank 10 dagen geleden
If you expect more from your money than the cost of the loan, take the loan. That's really all it boils down to. The secret is that most people will not invest that money. They will spend it on some other BS.
Joseph Scarfo
Joseph Scarfo 10 dagen geleden
my rusty and trusty 1500$ 2000 Chevy S10 ZR2 that I start with a screwdriver allowed me to pay CASH for my first piece of hunting land at 25 years old. Screw a payment and screw the bank to. I'll gladly finance a house because it gains value, but a depreciating asset like a car? No.
ed colins
ed colins 10 dagen geleden
No Dougscores ?!
Dislob3
Dislob3 10 dagen geleden
7:45 You would think that having money gives peace of mind also LOL
Dillan Mistry
Dillan Mistry 10 dagen geleden
The doggo in the driving place
Awesomest Drive
Awesomest Drive 10 dagen geleden
Scotty must have hacked: More Doug DeMuro, account
Mellowphant Pi
Mellowphant Pi 10 dagen geleden
My first thoughts are… everybody that has money in the stock market already knows this, and everybody that needs to be told this doesn’t have the money to take on the debt.
Tanzeer Siddiquee
Tanzeer Siddiquee 10 dagen geleden
"they think Peace of Mind has a big value"
Eymard Barron
Eymard Barron 10 dagen geleden
Enjoy life people! As my grandfather always said..."only guarantee in life is death" but then again if you are broke you can't really enjoy life either. sorry for the darkness in this one lol!
grandmaster Jim
grandmaster Jim 11 dagen geleden
How is debt cheaper than no debt? I bought a honda 10k and could have financed for relatively cheap 3.5% apr 48 months but just bought it outright. Without paying interest I had more to contribute to my 401k
Faden Mac
Faden Mac 11 dagen geleden
Could have bought a cool used 20k car and still invested the 50k. I recommend looking at Cars and Bids.
Ben S
Ben S 11 dagen geleden
IF your financial plan has this many “ifs” for the future, it is only a good plan if those “Ifs” end up being positive. IF you would have paid cash and your revenue would have fallen 35% and/or lost your job you would have been better off by having no payment. One shouldn’t assume that things will never change.
based_will
based_will 11 dagen geleden
Ah okay, so we're assuming I have enough money to my name to fully pay for the car but still finance it anyway 😂
T-Mass
T-Mass 11 dagen geleden
skip to 4:55 for him to actually start answering the question
T-Mass
T-Mass 11 dagen geleden
so I should finance a 300 dollar 94 civic ?
Cyba IT
Cyba IT 11 dagen geleden
Nope, buy whatever you can afford outright. You might not be able to drive a Defender (hehe) but you also won't have debtors tracking down your ass and your car is yours. If you're rich enough rent a supercar and then you don't have to worry about the insane maintenance costs.
Gil Folsom
Gil Folsom 11 dagen geleden
Excellent video! Recently purchased a 2021 C8 Corvette at MSRP. I am retired and had plenty of money in a 401k that I could have used to pay cash for the car. Financed $60k of it at 1.99%, keeping the cash I could have used in the stock market. Another key point for retirees is the tax liability of withdrawing money from a 401k. I would have probably had to have paid at least 20% in taxes, about $12,000 on that money. Finance charge for 60 months is $3,600. If there ever was a no- brainer, the loan was it!
Mark King
Mark King 11 dagen geleden
That 96 accord wagon is safe, people texting and driving is not safe.
egs2169
egs2169 11 dagen geleden
Doug in theory this works. The problem is people will almost always buy too much car because they only look at the payment and not the cost. And in many cases they will do ultra long 72 month loans which leads them to be upside down on equity if they trade in. So yes your theory works in a bull market but more times than not people will not buy responsibly.
Ryan Buttie
Ryan Buttie 11 dagen geleden
Preaching to the choir
rockabilly Page
rockabilly Page 12 dagen geleden
Smart way. "Cool cat"
Carbrickscity
Carbrickscity 12 dagen geleden
5:14 how is 1.99% free money...even at 0% it's not free money. Free money means you don't even have to repay the principle. Just free money given to you and no need to pay a single dime back. And I have seen 0% before. Also there's no guarantee win at the stock market, what if you lose during those months...double losing then. Not the best argument. There are also fees, opportunity cost, taxes, etc, in stocks. And he is assuming everyone is buying a $70k car. For less than $30k or $20k, it makes more sense to pay cash. And yes, to some people, peace of mind is priceless. You have to worry about 2 additional things (not 1) if you finance, that is to pay your car payments for whatever the number of months and to keep an eye on your investments. Some people would rather have none of the above.
Steve Haas
Steve Haas 12 dagen geleden
So, if you can afford to pay cash, finance the car if rates are low, I get that. If you can’t afford to pay cash, then don’t finance, but then you need a car to get to work and you can’t get those low interest rates.
VeloRydr
VeloRydr 12 dagen geleden
The advice Doug is saying, is to get a good loan, and invest the cash. It’s good advice, for people who already have the knowledge to make these types of high dollar investments. For those who know how to invest, likely, they already make these types of decisions. Because cars in general are terrible depreciating assets, I tend to buy them used at aggressively low prices. Other than gas and maintenance, I’ve never lost a large sum of money on a car in 20 years. Some of the vehicles I’ve bought actually increased in value, so I’ve sold them at the same price or more than I bought them for. However, I recently made the decision to buy a new car at a dealership paid full in cash because I wanted the vehicle. Not because I needed it…. Same goes for every luxury item I’ve paid for. For me, when investing money with an expected return, I prefer investing in property, education, stocks, and retirement funds.
Sean Stein
Sean Stein 13 dagen geleden
What if we buy reasonably priced reliable regular used cars?
Sean Stein
Sean Stein 13 dagen geleden
Lol what if we dont want to invest
K W
K W 13 dagen geleden
Always finance a car under 3% and invest the money, instead of pay cash for cars, dave ramsey plan is for failures, not for smart leverager Debt free is a LIE,a SCAM, u ALWAYS have bills to pay, just how big of them Mortgage / property tax Utility Insurance Grocery Internet Cell phone These 6 catagories is already a MUST for modern lifestyle Just try to make more money to off set thr bills AND of course, not changing cars every 5 years, just drive every car till it shatters
John McVay
John McVay 13 dagen geleden
This is only good advise if you can afford to put 20k down and have a car payment of $1060 for the next 48 months.
Avery Holder
Avery Holder 13 dagen geleden
Not really, it'll work just as well for someone putting down 5k and having $400 monthly payments. You're just working with smaller overall sums.
greenbay
greenbay 13 dagen geleden
Does Doug not pay taxes on his investments?
HoyVintageCycles
HoyVintageCycles 13 dagen geleden
So risking for short term is smart NOT haha. moronic mindset.
NikAradan
NikAradan 14 dagen geleden
There is one problem with the advice. If you put your cash into a stock market and finance a car, you need money in you monthly cash flow to pay the financing every month. I.e in case of your Defender, you need about 1100 each month of additional expence for 48 months. If you can handle it - then the strategy is a right ond for you.
Pluto&
Pluto& 14 dagen geleden
If safety was your main focus, what’s the oldest year that you would suggest buying a car?
J Z
J Z 14 dagen geleden
At this rate he is prob also thinking lease don't buy... idiot Doug. Come on man, if u can use cash do it, if u can't then take this advice (odv be careful w the markets)
Evan H.
Evan H. 15 dagen geleden
Dave Ramsey would like your location….
benjamin franklin
benjamin franklin 15 dagen geleden
so technically financing is a way of leasing but with more freedom, i get u doug😂
Aaron Lean
Aaron Lean 15 dagen geleden
Oh and as far as safety goes you're going to be safer 60's and 70's muscle cars compared to new muscle cars.
Aaron Lean
Aaron Lean 13 dagen geleden
@Avery Holder How not so? You don't think the monstrous size of old muscle cars is of a benefit? The bigger and heavier the car the better it is for occupants. No comparison between old and new muscle cars.
Avery Holder
Avery Holder 13 dagen geleden
Lmao no
Aaron Lean
Aaron Lean 15 dagen geleden
Financing a car is never a good thing. That is the reason new cars oversaturate the used car market and the used car market has amazing cars on it as it is. What reason would someone have to buy a new car if they're educated on cars they'd realize new cars all look the same and aren't built to last.
George Brown
George Brown 15 dagen geleden
I take it Doug isn't the type to ride motorcycles
George Brown
George Brown 15 dagen geleden
Use debt to obtain appreciating assets. That's how most wealthy people begin to make money. Buy property, rent it out to make a small amount of passive income. Build equity on it. Then take a loan out using the house as collateral. Repeat the process....and least that's what I've been told by and seen from wealthy people.
veeman 293
veeman 293 15 dagen geleden
wonder if Doug s advice would have worked in 2008 2009
veeman 293
veeman 293 15 dagen geleden
1.99 is not zero, it is 2
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