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The most common (and realistically feasible) method of buying a car is to buy it with a loan/credit card, then pay it off in bits every time interval.

However, say that I could buy a car in full when I've fully decided that I should buy a car. Should I? Of course you will save up on interest that would have cost you a lot otherwise, but am I missing anything? Are there any disadvantages to buying big items in full?

Take note that this question doesn't only apply to cars. It applies to big things in general.

JohnFx
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Zaenille
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2 Answers2

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If you have enough money to buy a car in full, that probably means you have good credit. If you have good credit, car dealerships will often offer 0% loans for either a small period of time, like 12 months, or the entire loan.

Taking a 0% loan is obviously more optimal than paying the entire lump sum up front. You can take the money and invest in other things that earn you more than 0%.

However, most dealerships offer a rebate OR a 0% loan. Some commenters below claim that the rebate is usually larger than the saved interest, so definitely do the math if you have that option.

Philip
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As a general rule of thumb, and assuming you have a choice, my advice is to pay cash for things things that depreciate, expenses, and consumables. Consider credit (even if you have cash) for things that will appreciate in value or generate cash flow. That is, use credit as leverage.

JohnFx
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