Buying a new car?

[BSClay]

Cash or borrow: The complexities of buying a new car
Financing the purchase of a new car is trickier than it may seem at first glance. If paying cash is an option, it still may be wiser to take out a loan, depending on what other uses you may have for the cash. Here are several things to consider when analyzing the cash versus borrow dilemma:

• First, everyone should have a rainy-day fund to cover six months of living expenses. Don’t use cash to buy a car if you don’t have this financial safety-net in place.

• Second, if you can get an auto loan with an annual interest rate less than the rate of return on a cash investment, then you will conceivably come out ahead by borrowing to pay for the car. But the calculation is usually not so simple. The real cost of a car loan should be calculated by adding up the interest payments you would make over the life of the loan, then adding to that figure other costs like loan-origination fees and any rebates you have to forgo by not paying cash. This total is the real cost of taking out the loan.

• Compare this total to your estimate of what profits you could earn by investing the cash elsewhere. Remember to consider the vulnerability of cash invested in the stock market or mutual funds. As recent market volatility suggests, you can not count on big profits year-in and year-out. Consider safe, guaranteed bank certificates of deposit in your calculation. Again, if you can invest the cash at a higher rate of return than the cost of the loan, you should borrow. Otherwise, pay cash.

[pennypinch]

I had to do the borrow option. There was no other choice for me. I wish I could have just paid cash and not had to worry about making payments but that wasn't in the cards. I hate having another monthly bill though!