[Low-Light]

When someone says they're "paying cash" for their new STi, does that literally mean they'll be handing over $30,000+ in green cash money to the dealer at the time of purchase? ...or does it just mean they'll be paying the entire cost of the vehicle with a check, or a credit or debit card?

Also, the invoice for the base model 2003 WRX at a local dealer is $22,263, and the MSRP is $24,295. Do any of you think that if I showed up with $18,000 in cash money at my local dealer, he would take that as payment in full for the 2003 base model WRX? If not, then do any of you have experience paying for new vehicles with 100% cash money? I was just trying to estimate the lowest price I could pay my local dealer for the 2004 STi, if I were paying on the spot with cash.

 

[CloNeGTS]

"Paying cash" never means actually handing over cash. It usually means writing a check from a money market account. I did this to pay for my 00 Celica.

There is no way a dealer would take anything that far under invoice. To tell you the truth, with the facelifted model, I doubt they consider invoice price itself for quite a while. I'm sure you could get an 03 for invoice now, but a dealer will never lose money on a sale and $4k under invoice would have to be losing money.

 

[WRX_Mundi]

Typically it does not mean actual cash. It means no financing. I think the dealer would probably think it was a little strange if you really paid with bills. It might be kind of humorous, but more of a pain that it would be worth (e.g. black Mercedes with tinted windows, you with your gold chains and sunglasses, get the cash from a paper bag :-?). The way I usually deal with cars is to completely separate the price from how I'll pay it -- it makes it more clear. Of course the dealers hate this -- they want to scam you with the "It's $20 a month less! <mumble>" "What was that?" "Er, <mumble> 72 months instead of 60 months.." "Ah, I see, you actually have me paying more for the car but because you have me paying over a longer period you think I'm such an idiot I won't notice." "But sir, it's $20 a month less!" Most car salespeople love to talk about payments per month and hate to talk about the actual price of the car. I suppose most customers care only about cash flow and don't think about net worth.

Anyway, no, actual cash doesn't mean much. I don't think you'll get a discount for it anywhere -- in fact most dealerships make as much or more on the financing part as they do on the car, so they may view it as less profitible. On the other hand, they are all hot to sell you a car today so it may get them excited. I swear I destest that statement every car salesman says, "What would it take to get you into this car today?" That and they actually think my wife would be happy if I surprised her with a new car (and payments) -- she'd be livid.

I did pay "cash" for my used Miata -- we agreed on a price, then went to handle the payment part with another person, and just wrote a check (as CloneGTS said, we moved the money from the money market to the checking for it). Very simple and very little paperwork. For the STi I'm thinking we'll finance most of it because of the low rates right now (and we can get our car loan setup as a home equity so the interest is deductible). Basically I'm going to bet that the market goes up more than 3.5% per year for the next 5 years (plus I get to keep the money in case of an emergency). But there is a lot to be said for having no car payments.

 

[wojo]

Basically I'm going to bet that the market goes up more than 3.5% per year for the next 5 years (plus I get to keep the money in case of an emergency).

Are you implying that you can get financing at 3.5%? If so, than financing might be favorable to cash purchase.

As far as I am concerned, financing a car purchase would only make sense if your interest rate on a loan is lower or equal to the return on your investment elswhere (equities, money market etc.). Presumably you could also argue that the risk profile of this invesment should be relatively low.

I thought about financing my last car, but I didn't think I could obtain an interest rate that is lower/equal to my money market return. I didn't feel comfortable with the stock or the bond market at that time either.

 

[WRX_Mundi]

Re: don't dissapointing

Are you implying that you can get financing at 3.5%? If so, than financing might be favorable to cash purchase.

Well, it gets complicated. I can get 5% from my credit union, but they set it up as a "courtesy lien" on the house. So after taxes it comes to about 3.25% (not getting into craziness like the delay from payment until taxes due). The tax status of each side is what I find complicated. Assume a tax-free investment (401k, IRA, 529, EIRA, Keogh, etc.) then if I make 3.25% I have enough to match what I paid in interest -- obviously with a tax free investment I'm not actually matching with the gains since I can't take it out, but in terms of net worth it is equal. In a non-tax-free investment I'd have to make 5% since I'd owe taxes on any gains that would bring the real return down to 3.25%. I'm sure inflation also gets into the picture here as well but (1) it's only 5 years, and (2) inflation is running low these days, so I'll ignore it. Obviously everyone's tax situation is different -- I chose to use mine at about 36% federal + state. Long term capital gains again complicate life since the rate changes. Sure makes you wish for a flat consumption tax.... (except our politicians could never resist adding back the income tax so we'd get the worst of both worlds).

As far as I am concerned, financing a car purchase would only make sense if your interest rate on a loan is lower or equal to the return on your investment elswhere (equities, money market etc.). Presumably you could also argue that the risk profile of this invesment should be relatively low.

You can view paying off a loan as a guaranteed return of whatever interest rate minus taxes. Taxes make it tricky. Using taxable numbers, a 5% car loan would require about an 8% investment to break even. There isn't any guaranteed 8% return out there -- long term I think stocks will do it, but it isn't remotely guaranteed! Given a tax-free loan, then it's down to 3.25% after-tax -- you need 3.25% tax-free which is probably doable. 5% after tax is harder, but if I assume the market long term will make 7-8% pre-tax, then I am better off investing the money. This is why I called it a bet -- it is by no means guaranteed. My cash flow situation is such that I'd prefer to make the bet, and if long term stocks really do run 8% then I'm ahead in the long run. You also have to weigh the somewhat intangibles of having a car payment (bad) as well as having the $30k (or whatever amount) in the bank/broker in a somewhat liquid form versus having it in fairly non-liquid form (the car title).

I thought about financing my last car, but I didn't think I could obtain an interest rate that is lower/equal to my money market return. I didn't feel comfortable with the stock or the bond market at that time either.

ING Savings accounts are about 2.3%, and I-bonds are running 4.1% (though inflation adjusted so they can fluctuate somewhat). You're right that looking for conservative investments right now that match car rates is pretty hard if not impossible. It seems the wrong time to buy regular bonds (at least I think it is) and I don't know enough about junk bonds. I'm sticking with stocks but I have a long time ahead of me and I need to invest in something. Obviously the last 3 years have shown that there is a good reason to be uncomfortable with stocks!

I'm no expert in the area though I try to be informed. While straying a bit I think we're still on subject.

 

[maryey]

if in any form of payment you hand over more than $9,999 the dealer has to report it to the IRS , right?

 

[amdmaxx]

funny story. My uncle 10 years ago came from russia and went to olds dealershit to get olds delta 88.
Brought a case with $20,000 put it on the table and pointed to the red one.. lol..
Dealer called the COPS since he needed a few days to get the car ready.. The COPS drove my uncle home, protecting his assets..
He then deposited the cash and handed dealer the check...
Paying cash to me = no financing. If I had the money I would shell out $31k for STi straight up..
usually dealers give u a discount when u pay up front, sicne they can manipulate the deal behind the scenes..

 

[STiObserver]

AMD - was that a freudian slip - olds dealershi& :lol:

I used to own a Delta 88 myself. It wasn't a bad car, till I fried all the sensors due to a faulty water pump - totally overheating it.

Yeah cash discounts. Not all they're cracked up to be.

Although like someone already said, most dealers will do something for cash.

If you really want to make friends with the Financing guy, walk in with some stuff from eloan.com or whatever... man they hate that!!! But there's nothing they can do, cause if they give you lip, you just say "BYE-BYE!!"

When I bought my first new car I probably could have paid cash for it, but decided to finance it to help build a good credit history for myself.

I probably lost a little money on the interest, but it sure came in handy when I bought a house later on!

 

[crazytrain]

AMD - was that a freudian slip - olds dealershi& :lol:

:lol: :lol: I have not laughed that hard in a long time! My mother used to have a '72 Cutlas Supreme. I loved that car, it was a pretty hot number. Unfortunately, she sold it to my cousin for $1 when I was like 8 or so. My cousin needed a car, and the olds was not in great mechanical shape -- or so it seemed. My uncle put a few $'s worth of parts in it, took it to some shows, won some prizes with it, and sold it for twice what my mom paid for it new. I got to drive a Suburban when I turned 16. That POS is still around.

Talk about financing cars. My parents are both accountants, and they won't buy a new car until they have driven thier current one into the grave (unless it's a car I want, and they sell it to my cousin instead :evil: ). By the way, I think my cousin paid cash for that olds.

 

[amdmaxx]

yep, loans are awesome for building your credit history..

AMD - was that a freudian slip - olds dealershi& :lol:

I used to own a Delta 88 myself. It wasn't a bad car, till I fried all the sensors due to a faulty water pump - totally overheating it.

Yeah cash discounts. Not all they're cracked up to be.

Although like someone already said, most dealers will do something for cash.

If you really want to make friends with the Financing guy, walk in with some stuff from eloan.com or whatever... man they hate that!!! But there's nothing they can do, cause if they give you lip, you just say "BYE-BYE!!"

When I bought my first new car I probably could have paid cash for it, but decided to finance it to help build a good credit history for myself.

I probably lost a little money on the interest, but it sure came in handy when I bought a house later on!

 

[X-Japan]

yep, loans are awesome for building your credit history..

That is a bonafide fact. I am 26 and have had 5 different car loans, 3 business loans, and a home loan since i was 18. I have paid em all off except the home loan and the most recent car loan. When I applied for that car loan my personal banker said she has never seen a credit rating as high as mine. I plan on financing some of the sti just to get even more credit history under my belt. Never hurts :wink:

 

[maryey]

What do you think my dealer will say if i alk in with a check for 95% of the car? Do you think Iwill have to do battle with the IRS?

MURLEY- this is something you could probably help me with.

 

[titsataki]

I thought the $9,999 changed to $3,000 but I am not sure. They introduced it due to the drug money or money laundering that was happening.
It would be no problem to withdraw your 10,000 from your bank and bring it over to the dealership and pay them. I would think you can write them a check though. I have for the last two cars I bought for quite a bit more than $9,999. If you took that money out of your matress and there is no direct connection how you earned them (paystubs etc..) hmm....

Cheers

Nick

 

[titsataki]

What do you think my dealer will say if i alk in with a check for 95% of the car? Do you think Iwill have to do battle with the IRS?

MURLEY- this is something you could probably help me with.

Check drawn to your account is fine. I have done it twice now...
Actually I wrote checks off two bank accounts for the balance of the the car price.

Cheers

Nick

 

[murley]

Hey there mareyey!

There will be no problem with puting down as much as you would like to put down. Now, some places want you to finance AT LEAST a certain amount or they won't give you a loan for the car. I would reccomend puting down like $25K and financing the difference on like a 3 year loan. You would only have like a $250 or so payment on a short three year loan. That will also insure that your finance charges won't be much even if your rate is high cause the amount financed and the term are so small. Have you ever had a car or home loan before?

 

[wrxsti]

The only reason why they want you to pay cash is because they can just take the money and they dont really have a tax on it like a check would be if they took it to the bank!!! so if you got the money do yourself a favor and they will probably cut you about $2k-3k off the car so they dont get stiffed by the banks

 

[Goose]

Ahhh, paying cash... hahhaha... that brings me back to my high school days. I went in to a little hole in the wall shop and bought an 86' civic 1500s.... lol... I paid 5k cash... Candian... The little oriental guy all but jumped out of his car when I threw the roll of hundreds at him... I'd been saving up for 3 years... THAT was a fun car!!!!! I stripped it, did a header back exhaust and a custom air intake... and a few other tweeks... I was pumping out 120hp at the wheels... and it weighed 1300lbs... I couldn't keep the front end on the ground.... lol... AHHH... paying cash.... Man times have changed!!!

 

[maryey]

No I have always payed everything in cash. I could do that now, but I don't want to I want to establish some credit.

 

[murley]

Smart girl! Andddd...., if you were even smarter you would buy it from meeee.......


*trying desprately to earn her business*

 

[maryey]

Murley, you know, you're alright. How many orders do you have?