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Hey I'm 25, and this is my first real big purchase. I have enough to pay the car off, but a lot of people say it would be better for me to finance say 10K of it for a couple years, just so that I would have a better credit history, for when I buy a house or something. What do you guys think? I have good credit, and I can get any credit card, but I don't feel that's enough.
Originally posted by Brando222 Hey I'm 25, and this is my first real big purchase. I have enough to pay the car off, but a lot of people say it would be better for me to finance say 10K of it for a couple years, just so that I would have a better credit history, for when I buy a house or something. What do you guys think? I have good credit, and I can get any credit card, but I don't feel that's enough.
Brandon
I'm doing exactly that: financing the car for 3 years and for only 10k even though I have the cash. I'm 26 and I've never taken out a loan, so I figured I might as well do that and get some loan history. My credit is stellar, though I have no loan history. This should help if I ever want to buy a condo or a house. I'd say finance. At 5% and for only 10k for 3 years, your payment will be around 300 bucks a month. That's really not very much.
I am a firm believer that if one can be debt free then do it. I would look at it this way - if you have just enough cash to pay for the car then finance $10K of it over a couple years (say 2). However, if you have say $100K sitting around then just pay it all off. Interest on a car loan is BAD because there is absolutely no tax deduction. You say you are 25 - you may want to buy a house in a couple of years. The mortgage interest is tax deductible (to an extent) and is far better debt to have than a car loan.
Finance it and invest the 10k in something. Interest rates are low especially with your good credit. You might make a buck or two in the process and build credit too.
Originally posted by KFM I am a firm believer that if one can be debt free then do it.
I agree. Pay it off, while you can. When it's time to buy or rent a house, the creditor(s) will be looking at your payment history, and not necessarily the amount of purchase that you have made.
Originally posted by fdao I agree. Pay it off, while you can. When it's time to buy or rent a house, the creditor(s) will be looking at your payment history, and not necessarily the amount of purchase that you have made.
Actually they look at both. They look at the total amount of credit you have obtained vs. how much is used. Basically a ratio of total credit vs. available credit. And they also look at payment history.
I say pay it off. I bought my house when I was around 26 and had no problem with my credit, it is really good actually. I never financed anything either, I payed for cash for my first new car . Also I have just 1 credit card that I pay off every month.
Cars are depreciating investments so I feel it's not a good idea to have more equity in it than required. Therefore, I prefer financing although I have the funds to purchase outright. As long as the interest rate is low and you're not upside-down on the loan (at any given time), then there should be no problems. The way I see it, not only are you building credit (just don't default on the loan!), you're also setting up a cash reserve. And you can use this cash reserve to earn interest in a savings account or reap greater returns through investing (only if you've been successful w/ it). But most of all, this cash reserve will be readily available for dire emergencies at any time (i.e. if you get laid off, then you'll immediately have access to this money).
However, I don't think it's a good idea to have too many outstanding loans at one time -- that's just too much liability to juggle for anybody. Just think of yourself as a corporation (in the financial sense). If you're good and smart w/ money and your spending habits, then my "technique" may work for you. But if you're not, then you may be better off just paying cash for the car.
Originally posted by Jeff_DML I say pay it off. I bought my house when I was around 26 and had no problem with my credit, it is really good actually. I never financed anything either, I payed for cash for my first new car . Also I have just 1 credit card that I pay off every month.
my 2 cents
Yes, but it all depends on the person and circumstances. How much did you make when you bought the house, how much was the house, how was the market at the time, was there a demand for the house...etc, etc. So many factors when buying a house. I will tell you that buying a nice house in San Diego right now is downright hard unless you have money. You will be bidding for a house along with 20 other people with allot more money and better credit.
Originally posted by importriders Yes, but it all depends on the person and circumstances. How much did you make when you bought the house, how much was the house, how was the market at the time, was there a demand for the house...etc, etc. So many factors when buying a house. I will tell you that buying a nice house in San Diego right now is downright hard unless you have money. You will be bidding for a house along with 20 other people with allot more money and better credit.
you are basically correct, I might be a unique case so I shouldnt generalize for everyone. I bought the house 2 years ago.
I guess my main point is that I did not have any problems so it could be the same for him. He should get a credit report for himself and see how it is.
Pay the Car Off or Finance??? Opinions?
