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Should I Pay Cash for a Car? - Cash or Finance Car - Financial Tips When Buying a New or Used Car

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Should I pay cash for a car or should I finance it? This is a common question that often doesn't get looked at thoroughly. Let's jump deeper into this discussion as to whether paying cash is better than financing when it comes to buying a new or used car. -------------------------------------------------------------- Please Subscribe! https://www.youtube.com/channel/UCNtQmqZlNUwzPuWmHPI_oSg?sub_confirmation=1 Visit me on the web- http://WiseMoneyTools.com/ Follow me! FB - https://www.facebook.com/wisemoneytools Twitter - https://twitter.com/wisemoneytools Google+ - https://plus.google.com/114367619155241197052 I have been involved in financial planning for over 33 years. I started out as a high volume stockbroker. After working with millions of dollars I decided there had to be another way for people to earn money in the market without all the risky ups and downs that leave you where you started, or worse. After reading a ton of books I came across a book on the Infinite Banking Concept and it completely changed my life and the way I view investments. Now I focus on building wealth in safe and predictable ways, like Infinite Banking, Cash Value Life Insurance, and Indexed Annuities to name a few. I post videos regularly so if you have any questions or comments feel free to email them to... dan at wisemoneytools dot com
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Text Comments (24)
Oranje Renaissance (2 days ago)
This guy wants to earn some interest $$ so he dont want you to buy car on cash. If u planning to keep car for long term buy it cash.....
Wise Money Tools (2 days ago)
+Oranje Renaissance I agree, I wasn't saying banks pay 10-12%, in fact we get 1-2% at banks in the U.S. I was saying you could invest that money or may have it invested already.  For instance we use our banking system (cash) to build homes. It would not make sense to take that money out of production to pay cash for a car. The money is doing much better invested than the interest cost - so paying cash would be extremely expensive. Hope that clarify's my comment. Thanks!
Oranje Renaissance (2 days ago)
+Wise Money Tools I don't want to be rude. But in Canada no bank pays you 10-12% on your savings and interest rates on cars are 4-5%
Wise Money Tools (2 days ago)
So let me ask you something. Suppose I have my money invested in real estate and it's earning 10-12%. I can get a car loan for 3%. You say I should pay cash for my car which means I'd have to take the money out of my real estate to buy my car rather than pay 3% interest on a loan. You see, if you are a wise investor you can do better with your cash than putting it into a car - which is a horrible place to put cash. A car is guaranteed to go down in value every single year! This is why the banking system can be attractive because it allows your money to still grow and compound while also using it to buy a car - or invest, at the same time. The length of time you own a car is irrelevant - paying cash has a cost, and often times a much higher cost if you have to take money from productive investments just so you can pay cash. You're most likely much better off investing your cash than putting it into a car. Hope that helps - Thanks for your comment!
well $30,000 in the bank is not going to make you money anyways, saving account .1 percent interest or a CD 2 to 3 percent interest. if you get it financed you end up paying interest and the money has to come from some where, which leaves you with not much to save with other finances you end up being a slave to the lender then you have to turn around and refinance for another car and you wont get much for your trade in, but with cash and good maintenance on your cash car you come out ahead because you are not paying interest and the average Joe is not always going to get a good interest rate so you end up paying more for the car than it is worth when you finance the car because you are in debt...
Wise Money Tools (18 days ago)
Thanks for your comment - If cash or financing were your only two options, you might have an argument. However, you miss the fact that there is the third option for your cash.  It is better utilized in an investment making you money rather than in a depreciating car. This third option to put your money in an investment, a business, an asset such as real estate, that might have a double digit return, it would be better for you to use your cash and take advantage of the investment. Certainly a bank savings account or a CD isn't going to do that. Finally, using our banking system where you can continue to earn a dividend and compound tax-free even when you have a loan outstanding, and when you pay interest, the lion's share comes back to you in your dividend, might be the smartest way to buy a car.  Keep in mind, a car is the worst place to put your money in the first place. Cars are a guaranteed financial loss which is why taking good cash/capital that could be used for investing, is not the place to put your money. We have to have cars, so we should pay as little as we have to, and certainly taking good care of them is a good move and keeping it for as long as you can is also a good idea. You can do that no matter if you pay cash or finance. In the end, create your own banking system for major purchases. Try to keep capital available for opportunities, and let your money work for you and grow, rather than have it in a car that loses value each year. Hope that helps!
John Dunston (27 days ago)
Wow...this video is bizarre. Who buys cars every five years? What nonsense!
Wise Money Tools (25 days ago)
I'm not suggesting this is a good idea, and it's obviously not something you do, however according to several reports some trade even more often. One report said the new trend is to trade your car as often as your phone. Here's the quote: "Most people change their mobile phone once every two years – but many car buyers are looking to upgrade their wheels within as little as 18 months, according to automotive experts CAP." Of course there are many on the other side who go 10 or 12 years - or more. Cars are a depreciating asset and are wealth killers, and I would not recommend trading too often. To accommodate the average for this video - it's right around 5-6 years. Some much longer, and some much sooner - that's why it's called an average.  However, the video is as close to accurate - depending on your status in life, your income level, and being happy with what you have and not needing the newest thing. Good thing you don't do it that often, save/invest, much better use of your money. Thanks for your comment.
Logan Sundheim (28 days ago)
Saying spending $30,000 will only get you an entry level car is ignorant, give me that money and I'll get the car I've been dreaming of for years with an extra 10 grand to put into it, people please think for yourself and don't listen to every youtube video you see.
Wise Money Tools (28 days ago)
Let me quote a recent Forbes article: "According to Experian, one of the big three credit scoring agencies, the average car price now tops over $34,000 in 2019!" I wasn't suggesting you buy a $30k car. I was merely pointing out what many people are up against when buying an average car. Of course, buying a less expensive car and saving your money is a much better plan. In fact, no car at all is the best plan if you can do without one and if you invest wisely. Cars are a horrible investment. Congratulations on buying cheaper cars, however, not everyone does.
Domenic Nicosia (1 month ago)
Interesting, however please show me where I can get 3% let alone 8% on my cash deposits. Also if you look at the added value of a newer reliable car, which is always in warranty and service plan. so no maintenance costs. Clearly changing car often will cost you, but this calculator is more than optimistic and fails to take a number of factors into account. There is no better way to purchase a new car other than 0% financing.
Wise Money Tools (1 month ago)
Of course 0% financing is the best. You may be able to get that rate every so often, but not everyone qualifies for that rate. In addition, most 0% financing requires you to pay more for the car. For instance, maybe you could pay cash and get a car for $30k, but if you finance at 0%, you can't get the car for less than $32,000. Always try to get a cash price first - then deal with the interest rate. 0% is a trick and a tease in many cases because they simply add the finance costs to the cost of the car and you really don't save. Consider buying a car that is a year or two old. That will save you the massive depreciation that occurs early on with a car. Two years is preferable. If you are worried about the warranty, you can usually negotiate an extended warranty as well. The calculator is only to show that you pay or lose interest no matter what. How much interest you lose depends on what you are doing with your money of course. In years like this where we do a lot of real estate, paying cash would mean giving up 50% plus growth on the money, so paying cash is silly. Bottom line is cars a typically a big waste of money. Buy the least amount of car you need, learn how to finance it yourself through your own banking system so that the lions share of the interest paid comes back to you. Hope that helps - thanks for your comment.
Amber Dalbec (4 months ago)
who on earth (who cares about their money) would ever spend $30k every 5 years on a car? Also, in most parts of the US cars are essential, so its more of a need than a want. I would be curious how this would look if you actually took into account realistic numbers. I want to see these calculator with 15-20k on a car every 10 years, because you then can assume even though the cars costs go up over time, you may have some trade in on your already paid off car. Also, what is the alternative you are suggesting? Financing? That will cost you more monthly than having a separate car fund that you know you wont be making money on because, you wont be paying interest which will cost a small fortune on 30k cars every 5 years.
Wise Money Tools (4 months ago)
Hi Amber - It is interesting the different perspectives on cars. You obviously have a much better outlook on your money and debt than many do. Car costs become relative to income. For some a 30k car is crazy, to others a 30k car is inexpensive. There are many who would buy a 60k car every 5 years - yes there are those out there. However, if you think about it, and I don't know these numbers exactly, but as an example, someone who makes 150k per year, a 30k car is not out of the realm. The ratio of car cost to income is about 20%. Now take someone making 40k and they buy a more reasonably priced car a 15k. Well reasonable is in the eye of the beholder, because now the ratio of car cost to income is 37.5%. Which is worse? Sadly there are those who make 50k per year and buy a 30k car. That car cost to income ratio is 60% - INSANE - but I see it all too often. Car rich, assets poor. You get the idea....it's not the car cost per se. It's all relative to your income. I like the rule of thumb of perhaps 10% -15% of income. So, if you are making 40k, you might be looking at cars that are 4000 to 6000. More importantly cars should come AFTER. you've learned to save and "pay yourself" first, at least 10% of your gross income. You never give up on paying yourself, just to buy a car. Ride a bike...LOL. Hope that helps....thanks for your comment!
Laurance Walden (5 months ago)
You didn't take trade in value into account, which would be a major factor when you replace a car every 5 years. Net worth would be significantly higher after 30 years with this taken into account.
Wise Money Tools (28 days ago)
There are many ways to look at numbers, I'm not suggesting this is a good idea, even with higher trade-in values. Cars are wealth killers!
So No (6 months ago)
Give him some kleenex so he can wipe all that shit off his mouth, always buy cash if you can.
OperTM1274 (6 months ago)
LOL! Using the static analysis investment return postulation scenario (used by investment/budget gurus) to dispel paying for cars with cash. Using their own tools against them.
RD D (6 months ago)
This man is completely wrong. I buy my car cash. no car payment. life of no student loan, no credit cards. Live below your means. you job is not promise tommorrow. CASH IS KING. You take out a car loan you lose both ways. You Pay bank fees. what happen if you lose your job. the repo man will be waiting for you.
CODY DUNLAP (6 months ago)
Awesome video. I try to teach this same thing to anyone I can. Btw is your course out yet? I am currently building an ebay resell curse!
Maple Flavor (10 months ago)
how long does a cash value withdrawal from a whole life policy take?
Maple Flavor (10 months ago)
thanks
Big Red (10 months ago)
Buying a car every 5 years is a way not to build wealth lol
Wise Money Tools (4 months ago)
You got that right!

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