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Which is ultimately less expensive - low financing or paying cash for a new car?
My family is getting bigger and I need a bigger auto. I've already picked out exactly what I need (model and particular package). It's a Honda and right now Honda is offering 0.9% financing for 3 years or 1.9% for up to 5 years. However, I have cash to pay for the vehicle if I choose to go that route. I expect to this vehicle will cost in the range of $33k-$35k w/o taxes, fees. I will not need this auto until January. But ultimately I just want to save money. I've always been told that the dealers bake in a higher cost if you finance. Is that true? Or do you establish the price before letting the dealer know you will be using their low financing? Ultimately I just want to pay the lowest overall cost for the vehicle whether its through financing or paying cash. Thanks.
6 Answers
- Š†ï†çhéŠLv 610 years agoFavorite Answer
If u pay cash, the dealer will most likely give u lower price...plus, if u get financing instead, sometiimes u might end up payin almost double ove time.
EDIT: fyi for people who don't understnd how financing works...you're not gonna pay the value of the car plus just 0.9% or 1.9% OF THAT amount...every year you're gonna pay that % on the balance you owe. So let's say first year you owe 35k, you pay 1.9% of 35k+ monthly payments, next year let's say your balance goes down to 32k, you pay 1.9% of 32k+ monthly payments...after 5 years that interest will add up to thousands of dollars, on top of what your car's value...if you got cash, pay for the car w/ that instead.
- ?Lv 710 years ago
The dealer will get a small percentage of the sale price as a reward for arranging financing, but that doesn't effect your deal. In most cases, it is better to pay cash if you can.
The only exception here is if you have to take money from a savings account that's paying more in interest than you will spend on the loan, then you should leave your money in the bank and take the low interest loan.
- Mad JackLv 710 years ago
Cash is always less money in the long run.
A $35,000 car will cost $35,000 cash.
However finance $35,000 for 3 years at 0.9% financing and that $35,000 car now costs $35,487.72 when you add in the interest.
To finance $35,000 for 5 years at 1.9% and that $35,000 car costs $36,716.40 when you add in the interest.
About the only time it would be the same is when they offer the 0% financing.
The link below is for a auto loan calculator. If you do an Internet search you will find lots of them. Simply plug in your numbers to see what it will actually cost you. It will also give you your monthly payments.
- ?Lv 610 years ago
if you opt out of a promo interest rate and pay cash, you should almost always be able to negotiate a lower price. The low rate is really just a subsidized rate.
But, like with everything at a car dealer, if the salesman/dealership can get you to agree to pay cash without getting a lower price, that's just more profit for them.
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- mccoybluesLv 710 years ago
I don't think the price at the dealer is going to change much based on your method of payment.
The savings will be in the interest you don't have to pay if you give them cash. Even at a low 1.9% you'll spend more than $700 in interest alone.
