How many Prius owners paid cash vs loan for their car?

Taking a zero-interest loan and putting it in the bank and collecting interest is great!

Banks call us deadbeats if we pay our bill in full every month, but they don't lose money on us because they still charge the merchant a percentage of everything we charge. If the bank charges the merchant 3% and gives me 1% the bank still makes 2%. Of course, the big profit comes from the interest payments, and they don't get that when we pay in full every month.

 

paid cash

 

I borrowed 18k for a 19k car....

But there are mitigating circumstances. I got a flexible loan so I can overpay any amount and either lower the payments or shorten the term. I'm in contract work so I make good money while the market's good, and can overpay, potentially clear it in 9 months. The deal I made with myself though was that if I got into any trouble I'd sell the car. I figure it'll be worth more than I owe in a few months time.

(In the UK you can get great cars for 500 quid if you need to get about - I gather you have to spend a fair bit more in the USA for usable cars...?)

 

<div class='quotetop'>QUOTE(molgrips @ Aug 16 2006, 05:34 AM) [snapback]303971[/snapback]</div>

well, for a mechanically great car that looks decent you're talking in the $2500-$4000 range, at least that's what we're seeing around here. hubby buys fixer-uppers for much cheaper and does the work on them, then drives em into the ground. or sells for a small profit

 

loveit,

Being careful before embarking on credit card games is mandatory; no reason to apologize at all.

The eagle's eye view of this lark is to accept an offer from a credit card company to transfer debt to them at 0% apr for a defined period (usually 6 - 15 months, but occasionaly 'for life'* offers are around), and accept a jacked up rate when the promotion is over. The days when there actually had to be a debt to transfer are pretty much gone, and now the credit card companies (CCC) are usually happy to simply have you write a check to anyone, yourself included. I take the money, invest it safely, usually in a note that corresponds to the duration I have the loan at 0%, and then pay it back before a higher interest rate sets in at the end of the promotion.

It's trivial; and if you like screwing CCC like me, fun. Nonetheless, there are important details to be aware of, and tricks to increase the amount of money lended to you. I strongly recommend any and all interested folk to head over to the Finance Forum at Fatwallet.com, and read a couple of the Balance Transfer (BT) threads to gain the insider's view of the game.

Jumping in and being sloppy can cost, so be prepared to do some reading, or best to stay away. If there is interest, I'll amend this post with a couple of the better threads that should be read, but I will not spoonfeed. I'm too lazy to do so, and it is a good sign the person does not have the requisite attitude for the game.

If you were thinking about using 0% apr money while paying off your car loveit, suffice to say it is a well trodden trail

* Minimum monthly payments turn it into a finite loan of progressively decreasing amounts.

Addendum: A Tutorial from a Master.
Tricks of an Expert

 

<div class='quotetop'>QUOTE(EricGo @ Aug 16 2006, 04:13 PM) [snapback]304262[/snapback]</div>

I'd certainly be interested in reading more about this. If you'd rather PM me, go right ahead.

mike

 

Paid cash for my new '06 package #8. Was easy to do because I sold my '97 Porsche 993 (Carrera)...ended up with a better (in my humble opinion) car and a pile of money left over.

No more $325 oil changes, or spending $1500 on new rear tires every 10000 miles!

There seems to be a certain aspect of independence (or at least, reduced dependence) to this car - not symbolic, like the Porsche, but genuine - and so, for both of these reasons, the idea of paying interest on a car loan on a Prius didn't make sense to me.

I did, however, keep my '73 Pinto, which was a gift from my Mother.

As I say, the Prius is no Pinto...but then, it doesn't need a license plate that reads, 'BBQFOR4' either!

 

if your MARR is greater than your loan rate (which if you have the option to pay cash will most likely be the case. It is also then likely that you have credit > 780) then finance it. If your MARR drops in the event the economy suddenly starts sucking, you can alway pay the balance of the loan in full at any point.

 

You guys must be financial experts or something, because it seems like having a loan is a bad thing to have, based on all those who paid cash for their cars. To me it sounds like if you don't pay cash for your car you're seen as a loser because you took out a loan. While I feel cash does eliminates payments of all kinds, it doesn't help build the credit score at all.

I'm just amazed on how you guys do it. I guess some has what it takes, others do not, or don't have the capability to. And this can apply to any car.

 

Looks like a large percentage of us paid cash.

Me, too.

 

<div class='quotetop'>QUOTE(Hopeful Future Prius Owner @ Oct 15 2006, 01:08 AM) [snapback]332928[/snapback]</div>

Loser ? No.
Financially unwise choice -- more than likely. But then again, so are children.

So ask yourself **why** you are buying it, and remember it is a depreciating asset at best, a toy of sorts for many.

 

I paid cash too. The only time I borrow is when I can make more on the money than it costs me in interest. Of course it's not always possible to do that, especially when you are younger with a family, but many of us are older and well established, so the cash route is good.

Tom

 

<div class='quotetop'>QUOTE(qbee42 @ Oct 15 2006, 12:57 PM) [snapback]333007[/snapback]</div>

and that, i think, is the reason so many here paid cash. i bet there's a correlation. those of us who just set up house, have student loans, startup career expenses, are still in school or are just getting a career up and going... we're in the minority here. and we're the ones that don't have $25k in the bank and have to take out loans.

there is a way to take out a loan and do it intelligently. in the last year times were decent, we were diligent, and now we're substantially ahead on our car payment. we made sure we will not be penalized for paying off early- so all we're doing is putting less toward interest and more toward principal. we've got a busy season where the money is better, and a slow season when the budget is tighter. during the busy season we crank out payments if we don't have other stuff to worry about. during the slow season or rough times it's back to the regular payment.

even an extra $50/month helps. the smart way to do a loan is to pay off faster than they anticipate, and make sure you won't be penalized for doing so.

 

Galaxee makes a good point, but it ignores why people have 25K sitting in cash later in life. Part of it is due to time, but part is due to living within one's means, and not in debt for pleasure items. A life of paying interest takes it's toll. I bought my first car when I was 27 years old, and my first new car when I was 38 years old.

Did anybody else notice that republicans are over represented in the group that financed their Prius (from an earlier thread) ? Fiscal hypocrisy, to go along with moral hypocrisy.

 

I'm amazed to see how many other people here paid cash for their Prius, as I'm pretty much the only person I know (besides my parents) who pays cash for their cars. Basically, I don't/won't buy a car until I can pay for it outright and then I buy the car I can afford. The longer I can put off that purchase (12 years this time around) the better the replacement car, right? It just doesn't make any sense to me to be paying interest on something that depreciates as soon as I take possession -- my mortgage is the only loan I have and mind you, I don't make much. I just don't buy what I can't afford. What a revolutionary concept! <G>

 

cash here too, although technically i did not buy it, but my company did. but the company is only me.

 

Generally speaking it is better not to have debt, unless you can leverage that debt to make more money. Thus, if you can borrow at 5% and earn 7% then go for it. To borrow money to buy a car which is a depreciating asset makes little sense. But, that said, there are times when a person will need a car and has no other choice. But, that person should not buy a new car, they should live within their means and buy a cheaper used car. Those that constantly borrow will likely be in debt all their lives.

If you must borrow, a car loan makes little sense - especially if you have any assets. If you have a house go get a home equity loan and use that money to pay cash for the car. That loan will be at a lower interest rate and that interest is tax deductible while a car loan is not.

 

Kirbinster, I agree whole-heartedly with your first paragraph.

I'll disagree regarding the use of a heloc to finance a car though. First off, car loans are around 6%, while helocs are over 7% and rising with the prime rate. Second, an awful lot of people have equity based on market appreciation and not savings. They are not the same, and should not be treated equally. Third, amortizing a car with a loan that is longer than the life of the vehicle guarantees an upside - down loan for life+. And lastly, it is just all too common for people to finance their debt-driven lifestyle through home equity. It is a bad, bad habit; and home equity lending, like credit cards, makes it all too easy.

 

<div class='quotetop'>QUOTE(EricGo @ Oct 15 2006, 02:04 PM) [snapback]333031[/snapback]</div>

this is true. but when young, it's nice to establish one's credit and prove that you're reliable for paying off larger amounts of money. say for when you want to buy a house later on. might as well use it for something you are going to get a lot of use of... say, a car.

of course this requires diligence and responsibility. and to not let yourself fall into a pattern of gratuitous use of credit. otherwise you're going to achieve the opposite of the intended goal.