![]() ![]() Some warranties on new cars are not worth the paper they are printed on (expensive mechanical systems that tend to give trouble are sometimes not covered) and often the dealer will try and talk you into purchasing an extended warranty. Anything not covered would be your responsibility and an extra expense. If you are buying a car, you would want to check into what is covered under warranty and for how long. If your $50K is invested in the equity market and you expect a 7% return or more over time (although the market can go either way), you may prefer to finance and leave your money to grow.Īnother important aspect for retired clients is if your money is all in an IRA or other retirement account - taking out a $50K lump sum to buy a car may actually be a $70K withdrawal once you factor in taxes and may push you into a higher tax bracket for that year. Interest rates for new cars are usually lower than for used cars and often the dealer may offer very low-interest financing. Some people psychologically have a harder time paying themselves back tha n paying the bank. Another consideration would be the probability of you replacing that $50K with new savings once it has been used to buy the car. If the $50K is all you have in emergency savings, you may not want to tie up funds in a depreciating asset and prefer to go the finance route, especially if you are still working. ![]() ![]() If you have $50K sitting in cash earning 1% but your loan would be at 6%, it may make financial sense to pay cash. Depending on interest rates, it may make sense to pay cash if you have sufficient cash available. ![]()
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