Anyone who bought their truck with cash?

While paying it off in cash may seem like the responsible thing to do, it doesn't make sense financially. Say you get a new truck, with all the options you want, warranty, etc. Say your interest rate is 3% or so on the truck. Imagine that you took the cash and invested it. No one can predict the market, but say a modest 7% return on your investment. You're now up 4%. It may not be much, but it's money that you could have pissed away by purchasing in cash.
Also, since tacomas hold,their resale value, for me it made more sense to buy new instead of paying inflated prices for a used one. My first brand new vehicle.

 

It wouldn't make sense for him to invest money borrowed. That's almost universally a terrible idea especially for someone who is just starting out. He should use that money to do things that help him get his life started. Getting that money tied up in investments won't help him when he's only making 2-3% realistically over his borrowing rate. That coupled with the risk of losing all or most of it and then making payments on money he doesn't even have anymore makes the whole idea a foolish proposition.

That borrowed 25K could give him some financial liquidity to get his life setup. Between living expenses, a used car, and a savings account 25K doesn't go as far as it used too.

Did the crash of the 1930's or the real estate bubble of the 2000's teach us anything. Don't borrow money to invest unless it's for tax purposes and you would be comfortable kissing it all good bye.

 

Walked in with 30k cash in pocket. Financed 1k to get 1k off the truck for a promo that they had.

Paid off truck 1 week later.

 

On a completely different note, how long does it take/how much less of a deal would you get if the dealer were to have to acquire the vehicle you want? As ya'll may know, Toyota's dealer inventory website (at least from my perception) doesn't show actual inventory as much as it shows trucks due to being sent to your region of dealers? Correct me if I'm wrong on this. How much would this irritate a dealer if you just wanted a specific color or something considering that isn't too uncommon or crazy of a request? I do have military obligations in the middle of the summer so I only have about a month to purchase a vehicle in addition to, again, I just don't want to get ripped off.

 

It all depends on what it costs that dealer to get the truck you want. Some dealerships have really good relationships with other dealers. If the relationship is good than usually the transfer becomes a trade which costs the dealership and you almost nothing.

However if your dealership isn't on good terms with others I've seen thousands of dollars added on to the vehicle price, depending on how far your dealer has to go to find it.

What has you so set on the Tacoma? Could you not come to terms with, lets say, a few year old decent car for half the money and wait 2-3 years to build up your credit with a small credit card then trade up to a Tacoma? You won't lose much on a car that's past it's first few years of depreciation and then you can use that 25K to get your life started.

 

Toyota will give you a better if you finance through Toyota (World Omni in my area). You can pay the loan off with no penalty before you accrue hardly any interest. My salesman said they get an extra $150 from Toyota Finance if wait 90 days before paying off loan.

 

I wasn't talking about margin bud, or borrowing to invest. I meant exactly what the guy above you explains. Not spending all your cash when you can make money off investing it far greater than the interest rate. It's just plain stupid imo to drop a huge $20k to pay something off when you can make 6-7% ROI and have a 2-3% interest rate and still have access to your money (liquidity) if needed. A diversified portfolio of that $20,000 will make not loss money is all I am saying. Nothing worse than spending $20,000 cash on something and possibly needing a chunk of that spend money when an emergency happens.

 

I agree to disagree. Money borrowed, even at 2%, should not be played with in that way by a rookie.

Btw I'm fighting for him to turn that 20K into more than just a car. I understand you are trying to get him to make more money with it but at the end of the day every piece of common sense tells me to never play with money in the market that you don't own outright.

 

If I were you I wouldn't get a new taco if I were planning on military obligations anyway (if you are being deployed or something).
That just isn't a smart move imo to hurry up and buy a new truck for it to sit if that is the case. I also agree to get something cheaper and save the $$ to get on your feet. When I graduated college I got myself into a condo first because I was tired of throwing away $1,000+ on rent when my 3 bedroom condo is much nicer and payments are below $700/month plus I am building equity by paying off my own mortgage vs paying off someone else's. My condo is worth $50,000 more now than what I paid in 2010 and now that I have got married and 5 years has passed we are considering buying a house soon. That $50,000 can be a good down payment when/if I sale.
Just another point of view/insite for you.
Vehicles depreciate vs real estate (most of the time) appreciates. I rather put more in RE to save/make money vs paying rent and also have my appreciation.

Not saying you should do the same but this was my strategy and buying my condo vs renting is paying off much better for me than in I would have bought a $25,000 truck cash that goes down in value.

 

I agree and know where you are coming from. I am not literally saying for him to take the cash and invest it. I am just using that more as an example to put things into perspective that everything has opportunity cost and paying cash for the truck leaves the opportunity cost of having the cash on hand for emergencies or the opportunity to potentially make more money off of it is all.

 

I am a huge rookie when it comes to all that fancy investing stuff. I know how interest works, that's about it; I am an International Affairs major. I will say, however, that I am fairly proficient at living very frugally and saving what I do have. I have a decent savings saved up, so the $25k loan is far from all I have, but I would like something like a Tacoma (folks earlier asked if I was considering other vehicles, I'm also considering the Frontier but believe it or not, the Tacomas in my area are starting to really drop in price drastically) for the reliability/peace of mind and capability of having a truck. I wouldn't get rid of it until the block falls out, and even then I'd just plan my routes so they're all downhill. The warranty and all that are just boons to owning the new vehicle.

Also, my military obligation is a month of ROTC summer training, so it's not a deployment haha. But I won't be able to communicate with a bank/dealer at all.

 

How much money do you have in your accounts or cash on hand?

 

No need to answer that OP. Just FYI I'd never post anything even ball parking my bank roll. That kind of stuff can come back and bite you. No offense to the PeeRunner. Maybe a better statement would be to tell you that if you already have more than 2 months of total living expenses, including your new loan payment and a retirement contribution, then taking out a loan for a new Tacoma is not a bad idea. If I were you OP though I would see what Toyota says about financing. Do you have a credit card? If you do and you've been good with it then you should have no problem securing a low rate equity loan for your truck through Toyota.

Even in the middle of my divorce years ago, with the banks knowing that, Toyota still offered me the lowest interest rate because my credit was otherwise fine.

 

I was a business major and if you don't have a long term financial plan (if you even care about such things), then get some advice from someone you trust. I agree with Sterdog, my first financial commitment was a place to live (I've never had a real estate loss) and over time, 5-6 years, my career and income allowed me to live the American dream without undue financial hardship or unmanageable debt. Remember, often you need to make short term sacrifices for the long term gain. Perhaps a difficult premise for the Gen X "gotta have it" and the "feeling entitled" generation to accept, but, as applicable today as it was 40 years ago.

 

Sometimes paying cash doesn't always make the most sense. It feels good to have no payment, but why spend all your money at once? What if something comes up and you need it? Then again, you did mention the 25k is a loan itself.

First off, they will haggle with you more if they think you are making payments, because they make money on the interest. If you do go all cash, haggle it as low as you can without bringing it up. Once everything is set and good to go, tell them you will pay cash in hand. They may throw a fit though. Even easier...haggle it all out and then pay it off in the first few payments (many loans won't allow you to pay in full for at least a few months from what I hear).

With very VERY cheap interest rates, it doesn't hurt to make payments. I hate having debt as much as anyone, but with 1.9% it costs me very little to make payments and it doesn't deplete my bank account in one blow. Some regions may even offer zero percent.

Shop around for interest rates (if you know your credit they can give you a decent idea). Then go to Toyota and maybe they will beat it. I got down to 1.99% at a local bank. Went to Toyota and they promised to beat it and got me 1.90% (then promptly sold the loan to the bank that offered 1.99 lol).

 

I used my usaa loan to buy my truck with cash back in 2012. The loan was $36k and I spent around 25 on the truck and just put the rest into investments. The interest rate on the loan is only 0.75% so I figure I can make more off the investments than I'm paying in interest. I was also a rookie (and still am) when it comes to investments but you can do it through usaa and they have advisors who can help. All of mine is pretty much just in low risk stuff. I didn't read the whole thread so I'm not sure if you already said what your rate was from usaa, but if it's better than the dealer's rate I would go with cash. For those who don't know, most guys usually do use these "career starters" to buy vehicles, and I've seen many spend the whole thing on a fancy sports car just to sell it a few years later because they're broke. I would definitely recommend putting a chunk of it into savings/investments just for some financial security. You'll probably move across the country a couple times within the first few years so it's good to have just in case.

 

I know this to be true...and many of my military friends regretted it. When I started my career that was a teaching point. Multiple sources told me "you're making a lot more money than you ever have...don't go and waste it on some car." I took that to heart. I saved and bought a house first, then the truck 8 months later. If you have reliable transportation, use the money for another purpose.

 

I think this is true mostly for expensive vehicles ... say 100k+

And it's not because your investment would be 4% more than the interest rate or something like that. It's because those cars depreciate faster than the interest rate. So it doesnt make any sense to buy it out when you can be investing the money you would be losing in depreciation.

 

Right on!
Same here.

 

Just a hard working dude that started by buying one house with a 30 year mortgage paying it off in 6 years taking the money and profit buying the next one with cash and doing it all over again. I'm up to 80 acres, house, 36'X36' garage/work shop and no debt. My wife and I have been blessed with good paying jobs over the years and dumped all of our extra cash back into paying things off early on, we are completely debt free.