Financing vs. Paying Cash for Your ‘Vette
What’s the Most Financially Sound Way to Get Behind the Wheel of a Fantasy Car? We Take a Look at Your Best Options
Anywhere there is a fence, there’s two sides of it to fall on. One proverbial fence in the world of Corvette owners is the decision of whether to finance or pay up front for a new car. This has been a hot topic as of late. Reportedly, 40.3% of Corvette’s buyers pay with cash. An Experian report says that only 56.9% opt for a loan.
For some, this makes sense. If you don’t have the cash to buy something outright then you either wait till you do, or you don’t buy it. That’s a good default to resort back to if you wish to avoid debts. But there’s another side of this equation, especially considering that the Corvette is a depreciating asset.
There’s no way to make money from a depreciating asset. However, what if you could soften the blow of depreciation by financing at a low rate and investing your money in a way that would allow it to mature?
If you have the option for a low-interest loan, you get to keep your own money longer while using the bank’s cash to pay GMFS and take delivery of your car. Most lenders can get away with low-interest rates because automotive loans are relatively low risk. If you don’t pay, they collect collateral in the form of your car.
So, the cash you keep up front can be put into investments that can return a higher percentage of interest. But beware. Investments that return higher than about 3% tend to be risky, and there’s a significant potential for loss. What are those investments? That’s for a financial adviser to answer. However, a quick look in this Corvette Forum thread link will show you a few options.
If you’re not the type that’s really interested in risk management with your money, then paying your car in full at the time of delivery is for you. However, if you’re already in the business of investments, there’s a potential for some interesting returns if you know exactly where you’re putting your money.
Chime in with your thoughts on the forum. >>
Via [CheatSheet]
