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    1. Member
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      11-01-2015 10:10 AM #1
      I am getting close to pulling the trigger on a Golf R. I am trying to decide the best way to pay for the car though. Normally there is some incentive to finance through the dealership whether by cashback or getting a better deal on the car, but with the Golf R it doesn't seem to be the case.

      1. I could pay cash. This would wipe out a good portion of my cash savings though. Instead of paying a car payment I would just pay this back to my savings monthly to build my cash back up.

      2. I finance for a fairly low rate of 1.99% which seems doable with USAA and the various credit unions. Whatever I get for my R32 would be the down payment if I don't do trade it in.

      With most interest accounts only paying 1%, my liquid savings isn't earning that much, but the interest rate isn't that much more either.

      As a I result it almost seems like the better financial decision is to take the low rate auto loan. Sure I will pay something in interest and more than my money would earn, but the difference seems to only boil down to a couple hundred dollars before you take into consideration the taxes on the interest earned. I have no other debt so there is nothing I would be better off paying down instead. It just seems like it would be smarter not to take a large chunk of my savings when I could pay a couple hundred in interest not to.

      Does anyone see any flaw in my logic?

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    3. Banned
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      11-02-2015 01:49 PM #2
      As a I result it almost seems like the better financial decision is to take the low rate auto loan.
      I agree. Better to have the liquidity of your savings account, just in case.

      In summer of 2007, I had a choice of banking a large sum of $$$ from a home sale, or putting all of that sum on the new mortgage.

      The decision to put most of it in the bank allowed me to make mortgage payments during the 24 month period after February 2009 when I was laid off. Money in the bank really is hard to beat....you don't need it until you do.

    4. Geriatric Member Hostile's Avatar
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      11-02-2015 06:04 PM #3
      There is no way I'd buy a car outright with cash when interest rates are so low.

      Talking round numbers (no down payment), $40k for the Golf R on a 5-year note is $2050 in total interest. On a 3-year loan it's only $1240. Either is pretty small when you're talking about a $40k car.

    5. Member GeoffD's Avatar
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      11-03-2015 11:53 AM #4
      Quote Originally Posted by Hostile View Post
      There is no way I'd buy a car outright with cash when interest rates are so low.

      Talking round numbers (no down payment), $40k for the Golf R on a 5-year note is $2050 in total interest. On a 3-year loan it's only $1240. Either is pretty small when you're talking about a $40k car.
      I pay cash for my cars. Among other things, it prevents me from overspending. I also don't have the most stable employment situation. The older and more expensive you get, the longer it takes you to find your next job. The last time I was between things, I had 14 1/2 months of down time. I had no debt. It was no big deal. If I'd had a big mortgage and a car payment for a car that was more than I really needed, it might have been a problem. Millions of people lost their homes and had their car towed away 6 years ago. I'd rather not be part of that statistic.

    6. 11-03-2015 02:47 PM #5
      yes this is a toss up.. I paid cash for my last car, that was 10 yrs ago,
      don't need any more debt, as I bought a house in the meantime (or I should say the bank bought a house and I can stay as long as I pay them )
      buying used I would definatly pay cash........as a matter of fact I doubt I'll take the 30% depreciation hit on buying new with cash again.........that is also something to consider, as soon as the deal is signed for cash you loose quite a bit when the car rolls onto the street (most of them anyway)
      if you can handle to debt perhaps the loan is a better way, each has to decide for themselves.
      pesonally I like having the cash in my hands and buying only when I can afford it...

      novel concept: live within your means
      try is sometime it's great!

    7. Member
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      11-03-2015 03:08 PM #6
      Quote Originally Posted by mauslick View Post
      yes this is a toss up.. I paid cash for my last car, that was 10 yrs ago,
      don't need any more debt, as I bought a house in the meantime (or I should say the bank bought a house and I can stay as long as I pay them )
      buying used I would definatly pay cash........as a matter of fact I doubt I'll take the 30% depreciation hit on buying new with cash again.........that is also something to consider, as soon as the deal is signed for cash you loose quite a bit when the car rolls onto the street (most of them anyway)
      if you can handle to debt perhaps the loan is a better way, each has to decide for themselves.
      pesonally I like having the cash in my hands and buying only when I can afford it...

      novel concept: live within your means
      try is sometime it's great!
      My issue is there isn't really anything used I want. I have been looking especially with how difficult it has been to buy the Golf R, but my wants are somewhat specific so nothing really fits.

      My budget is already set based off what I could pay in cash. I don't carry any debt and a car loan is the only thing I ever take a loan on. I always end up paying the loan off early anyway. Also keep in mind this is just my cash savings. I am not dipping into any of my stocks or other investments.

    8. Member Tornado2dr's Avatar
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      11-03-2015 03:46 PM #7
      Quote Originally Posted by GeoffD View Post
      I pay cash for my cars. Among other things, it prevents me from overspending. I also don't have the most stable employment situation. The older and more expensive you get, the longer it takes you to find your next job. The last time I was between things, I had 14 1/2 months of down time. I had no debt. It was no big deal. If I'd had a big mortgage and a car payment for a car that was more than I really needed, it might have been a problem. Millions of people lost their homes and had their car towed away 6 years ago. I'd rather not be part of that statistic.
      I a few words, you're an old-school-conservative(non-political)-saver. I was raised by one who had it beat into her head by two greatest-generation parents who lived thru the great depression and WWII rationing/war. It's very hard to argue against, but I don't always follow it. I've only recently been able to convince my mother that buying recent-used CPO cars works for us financially. She's a Buy-New, Make a good deal on an extended warranty, use the car till it is 10yrs old, and ditch the car the second it starts cutting into the "car payment" you pay yourself for the next one. She thought I was borderline nutz for financing the latest mommy-ride since I got it out of state, before I had sold the old one.

      I like the low rates but I don't like monthly payments to anyone. The only way financing works is if you have enough down in cash/trade so that you are never underwater, not even the day you drive off the lot and take the biggest hit. Too many people finance the whole nut and then are stuck in a cycle of negative equity.
      Quote Originally Posted by Turbio!
      They make my ass look pretty.

    9. Member
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      11-03-2015 05:26 PM #8
      Quote Originally Posted by Tornado2dr View Post
      I like the low rates but I don't like monthly payments to anyone. The only way financing works is if you have enough down in cash/trade so that you are never underwater, not even the day you drive off the lot and take the biggest hit. Too many people finance the whole nut and then are stuck in a cycle of negative equity.

      This is something I learned long ago from my father. I never trade in a car before it is paid off so I always have positive equity and I have never been upside down. I tend to even do a down payment on top of the trade just to get my payments to the level I want them to be where I can easily afford to pay double every month if I want to.

    10. Member rich!'s Avatar
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      11-03-2015 08:33 PM #9
      simple: if your cash savings also means emergency fund then no to paid full in cash.
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    11. Member WOB24v's Avatar
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      11-08-2015 05:55 PM #10
      Came in the forum looking for advise on this exact topic, just a much smaller scale.... cuz I'm poor.

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    12. 02-07-2016 10:33 AM #11
      I was in a similar situation 2-3 years ago when I was WRX shopping. Either cash or 2.2% loan. I decided to put zero down and financed it all for 5 years, including taxes and fees - 2.2% was just too low and the cash on hand meant I could pay it off at any point if need be.

      A year later my now-wife got unexpectedly pregnant and we pulled the trigger on a house about a year sooner than planned. That $20k came in handy.

      I then ended up selling the wrx for what I paid for it and ended up pocketing about $1500 more than I owed on the loan (paid 22, out the door around 26, paid $500/mo for a year, sold it for 22....something like that).

      The big advantage was financing through a credit union. When it came time to sell i just met the guy at my bank and they had the title on hand. He signed, I signed, he gave check, they gave me title, I signed title to him and we both went on our way. Couldn't do that if the title wasn't local. Also buying a highly desirable used car with a 100k mile transferable warranty helped. Now I'm driving a 15 year old 4runner that I paid $5k for and the wifes carting the baby in a new forester
      Last edited by GTiTOM; 02-07-2016 at 10:36 AM.

    13. 02-07-2016 06:30 PM #12
      Since it likely doesn't make much difference financially whether you pay cash or finance with rates so low, I would look at it from a different angle. If you pay cash, you'll make a big dent in your savings which will tend to make you feel poor, which will tend to make you save and be frugal. If you finance, you'll have a new asset and still have all that money in the bank, which will tend to make you feel rich and go on further spending sprees. That new R needs bigger wheels after all, and a lowered, adjustable suspension, a bigger exhaust, etc, and guess what, you've got the cash to buy it!

      So if it were me I would pay for it in full with cash, and enjoy the savings in interest and frugal mindset it will give you.

    14. Member malibuboats91's Avatar
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      02-07-2016 07:33 PM #13
      I was in the same situation a year ago when I bought my GLI. I could afford to pay cash for my car or finance it at 0.9% through VW. Since I was earning about 0.99% on my savings I just got a 3 year loan. My payments are high, but it will prevent me from being upside down in my loan and I'll still be making a whole 0.09% additional on my savings lol. I will admit this tactic didn't help me at all when I decided I didn't like my GLI and wanted to upgrade after 10 months. Good luck!


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    15. 02-10-2016 12:12 PM #14
      Quote Originally Posted by a_riot View Post
      Since it likely doesn't make much difference financially whether you pay cash or finance with rates so low, I would look at it from a different angle. If you pay cash, you'll make a big dent in your savings which will tend to make you feel poor, which will tend to make you save and be frugal. If you finance, you'll have a new asset and still have all that money in the bank, which will tend to make you feel rich and go on further spending sprees. That new R needs bigger wheels after all, and a lowered, adjustable suspension, a bigger exhaust, etc, and guess what, you've got the cash to buy it!

      So if it were me I would pay for it in full with cash, and enjoy the savings in interest and frugal mindset it will give you.
      Or finance it and put the $20k into a CD you can't access. In 2 years, you'll have like $21,000 or so. That's like 2 or 3 free car payments.

    16. 02-10-2016 06:25 PM #15
      Quote Originally Posted by GTiTOM View Post
      Or finance it and put the $20k into a CD you can't access. In 2 years, you'll have like $21,000 or so. That's like 2 or 3 free car payments.
      That would require that the interest on the CD is higher than the interest on the loan. A 2 year CD is paying a little over 1% right now. Given the Fed's interest in a NIRP environment, that might not be too bad. If you needed to get the money for some emergency you might face a penalty negating the whole purpose though. There's nothing wrong with paying in full for something instead of financing it. You can usually negotiate a better price as well. Somehow we've become convinced that not only is it good to finance things we can't afford, but also things we can.

    17. 05-04-2017 05:17 PM #16
      Thought I'd bring this old thread back to life with a question regarding VW's current 0.9%/60 Month financing on Golfs ( in the U.S.). VW suspended its $1,000 Customer Loyalty Incentive effective 05/01/2017, but continues to offer the low financing rate.

      Can someone check my financial thinking here?

      I could pay cash, but if I were to instead put the purchase money in a CD (such as one at Synchrony Bank offering 2.25% for 60 Months) and pay 0.9% on a loan from VW Credit, I'd net 1.35% and earn total savings north of $1,500. I can safely make the monthly payments while keeping the money on deposit in the CD.

      Is this sound thinking or is it flawed? Thanks for any advice!

    18. 05-05-2017 01:31 AM #17
      Quote Originally Posted by Fitz Ingarage View Post
      Thought I'd bring this old thread back to life with a question regarding VW's current 0.9%/60 Month financing on Golfs ( in the U.S.). VW suspended its $1,000 Customer Loyalty Incentive effective 05/01/2017, but continues to offer the low financing rate.

      Can someone check my financial thinking here?

      I could pay cash, but if I were to instead put the purchase money in a CD (such as one at Synchrony Bank offering 2.25% for 60 Months) and pay 0.9% on a loan from VW Credit, I'd net 1.35% and earn total savings north of $1,500. I can safely make the monthly payments while keeping the money on deposit in the CD.

      Is this sound thinking or is it flawed? Thanks for any advice!
      Its starting to sound like interest rates are headed up. Locking your money in at 2.25% might not be the best choice right now. 5 years ago it was a genius move. Today? Not so much, although no one can say for sure. You'll also pay income tax on that $1500, depending on your situation.

      What I hate about financing is that it allows manufacturers to increase the price on you. So even if you pay cash, you are paying more than you should because the price has moved higher in anticipation of a low finance rate. So even though the financing looks "cheap" because the interest rate is low, that doesn't always work out that way. Same reason housing is so overpriced.

    19. 05-05-2017 08:52 AM #18
      Quote Originally Posted by a_riot View Post
      Its starting to sound like interest rates are headed up. Locking your money in at 2.25% might not be the best choice right now. 5 years ago it was a genius move. Today? Not so much, although no one can say for sure. You'll also pay income tax on that $1500, depending on your situation.

      What I hate about financing is that it allows manufacturers to increase the price on you. So even if you pay cash, you are paying more than you should because the price has moved higher in anticipation of a low finance rate. So even though the financing looks "cheap" because the interest rate is low, that doesn't always work out that way. Same reason housing is so overpriced.
      Thank you -- these are all valid points. I hadn't thought of income tax diminishing my gain. I'll continue to think this through, including the direction of CD rates. Your thoughts on the inflationary effect of cheap money are spot on! When buying things, I too often think of the price reductions we'd see if loan rates were higher or credit standards were tougher.

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