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

by haisanPHANTHIET


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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Brett Miller 07/12/2021 - 2:34 Sáng

So I should stop dailying my 76 Fleetwood? Hmmm…

_ shawn 07/12/2021 - 2:34 Sáng

Why's your dog in you vehicle? that's what I want to know

Evan Acey 07/12/2021 - 2:34 Sáng

Suze Orman is a straight up RIP OFF artist!!

David D 07/12/2021 - 2:34 Sáng

……I don't know about that. Also, 2 Land Rovers though?

I think this advice makes sense with a bit more context such as investing the difference in a retirement account with the understanding this will be redeemed on the future and not a get rich quick scheme. This also assumes the person is debt-free (credit & loans, mortgage is fine).

Lastly, that they have a emergency fund just in case of any needs. Tying up your 50k in the market and needing to cash out during a dip, oops.

Lastly, why not just buy a reasonably priced new or new-ish used car closer to 20k and save yourself cash, further interest rates and fees, while still having cash to move as needed.

This is a fair move to make but this is Personal Finance 201 and COVID taught us that lots of folks are getting hit hard so your advice would be reckless for them. "Personal" finance because a good fit for you might suck for me.

Ron P 07/12/2021 - 2:34 Sáng

Dougville never misses

Snotty Scotty 07/12/2021 - 2:34 Sáng

Don’t buy with cash because law enforcement is lurking about to seize it

Espinoza Novak 07/12/2021 - 2:34 Sáng

Simple rule to financial success. Never borrow money for anything except real estate.

Colton Loberg 07/12/2021 - 2:34 Sáng

Here's an idea, only pay under 3k for a used car, ever, save $10,000 plus buying used from a dealer (or private)
I pay $500 most for my used cars
Use them for 1-6 months
Sell them for 1500+
Have a new car every couple months
Make 10,000 plus a year on used beaters

AutoTempest.com 07/12/2021 - 2:34 Sáng

One minor quibble I'd have with this is that except for young people or those in particular circumstances, it's not normally recommended to have one's entire portfolio in equities; it's better to diversify to smooth out the volatility of the stock market, saving you from an unlucky streak as you get nearer to retirement, as well as preventing people freaking out at market swings and then making poor decisions. So a standard portfolio would have a mix of equities and fixed income – and that fixed income will often be paying you less than you'd be paying on your car loan, especially if you're investing in a taxable account.

That said, I still largely agree with the advice of looking at opportunity cost. Same with aggressively paying down a mortgage vs investing.

Matt Howell 07/12/2021 - 2:34 Sáng

If the interest rate in the vehicle is about 3%, but you have some sort of endeavor that you dabble in that will earn you 9% return on your money it would make sense to have the liquid cash on hand to make the 9% and pay the three and end up ahead.

Pro Race 07/12/2021 - 2:34 Sáng

I always say that safety is the only reason why I would buy a newer car. I simply like the old ones more, but safety is SO important, that going with a really old one, it just do not pay.

Jon 07/12/2021 - 2:34 Sáng

The important concept is .. opportunity cost… It is a difficult concept to grasp. Check Potter & Sanders (2012) Do Economists Recognize an Opportunity Cost When They See One? .

Jack Chalmers 07/12/2021 - 2:34 Sáng

Thank you so much for hammering home the point about safety features. Billions have been invested into car safety and it's worth every penny for the lives it's saved. Get something with a good Euro NCAP rating!

TooCoolForSleep 07/12/2021 - 2:34 Sáng

Thanks for the advice! 🙂 I'm a young man who's 22 with zero credit and I'm very much looking to buy my mom a new 2022 Lariat Maverick with cash (upgrade from the 2008 Ford Explorer that I spent $5.4k off of Facebook with cash) which is about $26k not sure how much they would lower the price from $26k but I doubt I'll get any less than $23k. So because I'm male with zero credit and finally getting around to my license, I'm sure my interest rate will be 10%+ easily. So wasn't sure if putting $10k down and paying off the rest would be better than paying the $26k (which could be lower upfront). But since cash would be a done deal, the loan with a high interest rate might make less efficient money use. Though since I have zero credit, it would give me a great boost to starting it. Currently mixed mind set so if anyone can suggest the best or other option(s) I haven't, let me know 🙂

Saturn 07/12/2021 - 2:34 Sáng

w vid

Michael Bernardo 07/12/2021 - 2:34 Sáng

This is bad advice that can be dangerous if it falls into the wrong hands. I strongly advise to spend no more than 5% of your overall net worth on the purchase price of a car, and pay for it in cash if possible.

Mike H. 07/12/2021 - 2:34 Sáng

Sorry Doug …
Debt is bad …

Tenzack YOGI 07/12/2021 - 2:34 Sáng

Let's go to junkyard.. thats far better than financing.

Teacup Toe 07/12/2021 - 2:34 Sáng

Hi Doug, I'm about to apply for a $20,000 loan, 60 month. The interest will be about $2,000. Would it be helpful for my first payment to be $5,000 to save on interest?

josh3221ify 07/12/2021 - 2:34 Sáng

The reason those frugal people are still driving around in those 20year old cars, is because they are good drivers, no amount of tech will ever make you a good driver, and people still die in modern cars with many airbags, no airbag will save you at speeds in excess of 250km/h. We also think tech has advanced, but in reality its at its still at its infancy, most of these systems only prevent fender benders and scratches on the bumper, manufactures are just hyping them up, if proper studies are done they will see no improvement in safety overall with the addition of these systems. Just a way for manufacturers to get you to buy a new model every 5 years.

josh3221ify 07/12/2021 - 2:34 Sáng

1% interest in USA, as for many people across the world where interest rates are as high as 8-17%, getting loans for cars would cripple them financially.

Brian G 07/12/2021 - 2:34 Sáng

Hi is $250 an month for 6 years an good deal 8% interest rate. I do need to build my credit score its very low

Shadow Tiger 07/12/2021 - 2:34 Sáng

With a new car no smelly fart cushions no snots spit or who knows what else among a bunch of issues of how the vehicle was driven. I will always go new and drive it until it stops and becomes a money pit and then buy new again. I don't care about how much the value goes down off the lot because i know exactly how the vehicle will be driven and i do all the mechanical work when needed. No thanks to fart snot vehicles and who knows what else.

U WUT M8? 07/12/2021 - 2:34 Sáng

as long as the interest is less than 3.x% its a good option

iComplainer 07/12/2021 - 2:34 Sáng

video starts at 4:55

CapFlipGaming 07/12/2021 - 2:34 Sáng

Dave Ramsey is an idiot, take his advice with a grain of salt.

Questioner 07/12/2021 - 2:34 Sáng

If it is for a reliable car to get to work, someone not mechanically savvy may save money financing something a little more expensive but more reliable, like a $15000 Corolla instead of a $5000 one.

Kathy Johnson 07/12/2021 - 2:34 Sáng

All you need is an old reliable truck. Now thats an investment. Trucks last forever. More reliable than all these non-american cars that are as reliable as a McDonalds soft serve machine

Emiliano Rosas 07/12/2021 - 2:34 Sáng

– Never buy something financed-
– Oh, so you don't understand opportunity cost. I am sorry-

tom kouri 07/12/2021 - 2:34 Sáng

It's easy to give this kind of advice when you can look back at market returns rather than predict what the market will do over the life of the loan. I like Doug when he's talking about cars. Not so much when he's advising on finances. So many assumptions he's making here as well as suggesting that an investor's "piece of mind" has no value? Nope…

David W 07/12/2021 - 2:34 Sáng

I admit that financing motor vehicles is smart in some cases but when it comes to backup cameras I have driven modern vehicles that have had them and those that haven't. It may have been only in the last several years that backup cameras haven't just been in the luxury types.

GreatestVersion 07/12/2021 - 2:34 Sáng

Honestly a decent take. A new perspective for me

Jay Say 07/12/2021 - 2:34 Sáng

Seriously, stick to car reviews mate.

Chris Whiston 07/12/2021 - 2:34 Sáng

Per usual, Doug drones on way too long about this. I put a hard line at 5% on a car loan. If you can’t qualify for a rate below this level, you should be paying cash for a used car. Regardless of opportunity cost, someone with bad credit doesn’t have any business levering themselves up if they can’t even pay their bills on time. When Doug mentions 6-7% being the cut off, he’s being laughably ignorant given anyone paying that high of a rate likely has a history of collections or not paying bills on time, for example. They’re not going to be invested and even if they did borrow to invest, by the time taxes were figured in, this hypothetical borrower/investor would not even come out ahead (using historical spx returns as a guide) – so there would likely be no advantage but yet market risk that would not have otherwise existed which has a cost in itself, especially tail risk. Stay in your lane Doug.

Actual decent advice given the current climate would be this: If you own your car but have a high interest credit card or other loan, a risk-less way to come out ahead would be to cash-out refinance your car. You’d take a loan out on your car at some low rate (likely 2-5%) with a long term and use the proceeds to pay down higher interest and/or shorter term debt. Instead of making those large interest and/or principal payments, you simply make car payments on a long term vehicle loan which doesn’t charge much interest given its secured nature so it doesn’t bleed you dry every month. Rates are typically affordable out to 84 months…

SocksOnFeet 07/12/2021 - 2:34 Sáng

You put down $20,000…you make money off the stock market…you have a ton of money already bro. Banks dont give poor people like me 1.0% APR, they give us 5-12 % APR on a 7 year lease…that can be an extra 10-15k on top of the msrp on something new over 30k. You dont have the problems that poor people have. We buy $2,000 cars and fix them to last as long as possible. I love your content but you sound like a delusional rich person in this video lmao play the market! play the market! What part of we dont have money to "play" with don't you understand? Lmao…wow….

Chico Dust-E 07/12/2021 - 2:34 Sáng

Damn $50k at 1.99% is $9,950 in interest! 👀

It's definitely smart to invest but that's more than I paid for my last car lol. I bought a old honda, rebuilt or replaced everything that needed it and its been running for 12 years now.

I can't swing $1,248 a month for just a car, that plus insurance is my rent lol.

Doug talking big money moves but it's decent advice.

retina gland 07/12/2021 - 2:34 Sáng

understood, i'm gonna pay cash for a 1985 Ferrari with no airbags so i can save money and own it myself 😉

Petri Burger 07/12/2021 - 2:34 Sáng

Doug thanks for the info. But i still have an issue. Again, like all these money savvy ghurus… all!! Is in every single one off these money savvy advices only work for the guys/ladies that do have the money. Here in SA, we will never see 2%, we dropped to like 6%, for a few months, here not even the middle class have can save up enough just to buy a decent vehicle, not even talking about the exotics and supercars, not even mentioning fuel and insane tax brackets we live with. Thats why we work towards paying cash as the majority cant even get through the month. Whats your advice for the middle class and lower?

lilfridge 55 07/12/2021 - 2:34 Sáng

I do agree yet I have a 1993 Nissan Sentra I bought for $200 clean title straight body runs with no issues and it’s had service it’s an entire 300k mile life and I got in a 70 mph accident into a concrete barrier on the freeway cause people can’t drive and I was left with a scratch on my fender


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