Buying a used car: partially finance it?

[Nutria]

Hi,

We can buy a $10,000 used car 100% with cash, but it would wipe out our "general" savings (there would still be money in the bank for semi-annual car insurance, annual property tax, etc) plus bite into our e-fund.

Thus, should we take out a partial loan ($3-4,000) to maintain some liquidity, or go 100% cash? (My FICO8 score is 850+, if that matters, so I'd get a decent loan rate.)

What worries me is a "double whammy" (job loss and for ex. car repairs) when the e-fund is low.

Thanks

[autoxer]

That sounds like a fine plan. A small loan with a good interest rate and a short term will just give you flexibility. It isn't overextending yourself, like the banks are encouraging people to do.

[disneysteve]

We always buy used and we always finance part of it. The past couple of cars I was able to get at 2.9% which is low enough. I paid my car off within a year. We still have a few payments left on my wife's van. For us, it was more about cash flow. I'd rather make the payments from current income and leave savings intact even if it costs a few extra dollars in the end.

[bjl584]

Partially financing with a plan in place to accelerate the payoff of the loan sounds good to me. That is what I did with my last vehicle.

[Nutria]

Thanks, all.

That's what I'll do, then.

[tripods68]

What's wrong buying a $6K car and pay cash for it?

You'll end up keeping $4K in the bank for any type of emergency (i.e., job loss) WITHOUT incurring "partial car payment".

You have no car payment to worry about & you a car paid. A WIN WIN proposition!

[Nutria]

What's wrong buying a $6K car and pay cash for it?

I want something newer and more reliable for the kids.

[tripods68]

I want something newer and more reliable for the kids.

There's plenty of reliable cars in that price range. Bought cars & sold over the years--just have to do extra research various cars model that are dependable to begin with (Honda, Hyunda, Toyotas, Nissan). Its all up to you how willing you want to research a particular model and bargain.

Example:
1995 Altima paid cash $3K in 2006 - Sold it for 2K in 2009

2005 TC Scion paid cash $6K in 2009 - Sold it for $6k 2012

2012 Subaru WRX Paid OTD 20K with down payment - Sold it last August for 20.5K

2002 Hyundai Santa Fe AWD GLS with 170K miles - Bought it last year (July) for $3K as my daily driver

[ua_guy]

I agree with partial financing. $10k isn't an unreasonable budget for a newer, safer vehicle that's fairly basic. Especially if it was a more expensive car to begin with, the depreciation curve is probably going to be flatter rather than steeper, so there will always be an asset behind the loan that could be easily sold, even at the start of the loan with cash down.

[Jluke]

Partial finance is the way to go if you're looking at cars in the 8 to 10k range; if you find a good vehicle below that range, then it would probably just be cash payment.

Figure out how much you want your monthly payment to be using the loan rate, term and amount, and then use the cash to make up the difference between the loan and sale price of the car.