[Carol]

When purchasing major items like an RV, cars, etc. Would you rather pay cash or get a loan for low interest and keep cash invested?

Consider the pros and cons of each option, such as the potential savings on interest payments versus the flexibility and ease of managing monthly payments.

Which option aligns more with your financial goals and personal preferences?

Would you lean toward paying cash to avoid debt, or would a loan with a low interest rate make it easier for you to manage your finances while still acquiring the item you want?

[Tony]

I would rather get a low interest loan. However, as of today, those mostly do not exist. They absolutely don’t exist for an RV.

Some car manufacturers might offer them on new purchases.

My Jeep dealer did not.

[Lacey]

For major items like that, my first rule is to never buy new from the dealer (which is the only time you can get those 0% financing deals).

What you think you’re saving in interest, you’re overpaying in price because of how fast they depreciate in the first couple years.

So, I am a fan of buying something well cared for at the depreciated price. Also in my state, there’s no sales tax on private party vehicle sales, so I save thousands there too.

Back when interest rates were super low, financing made sense. In 2020 we bought a used RV trailer from a friend at a great price, put 50% down and financed the other half at a really low rate.

My most recent (used) motorcycle adoption was in 2021 when rates were crazy low, so I opted for that (still paid it off early though).

But gone are the days of those 2020-2022 interest rates.

I would absolutely not finance anything with today’s rates.

[Michael]

I’d rather pay cash. I hate payments messing with my monthly cash flow. I might consider the arbitrage if the rate was low enough, but in the era of 4-5% T-bills you’re paying for that 0% APR in the MSRP.

[Kris]

Depends on how low the interest is. Also, often you can get better deals by agreeing to their financing and then pay it off immediately.

[Shawn]

My car I bought on a loan because I could get it at 0%. Have the cash, buy the loan if the terms are good enough.

[Patrick]

Does it have to be a major item? One time I took a 5 year 0% loan on a mattress.

[Prasad]

Depends on whether the major item is a necessity.
If necessity and you have the cash, take loan if loan rate < HYSA/money market rate, else pay cash (or hedge, say with 50/50 cash/loan).

If necessity and you don’t have the cash, then there isn’t a choice so take the loan. If luxury purchase and you don’t have the cash, don’t buy it.

Also depends if you have emergency funds saved in HYSA/money market elsewhere.

[Dara]

Cash. Unless it’s 0% or possibly a business/ write off. You can write the interest off on an RV as a 2nd home.

Or if you rent it when you’re not using it it’s a nice little business expense.

Run the numbers and see which works out best.

[Rich]

Good luck with the electric car. Once the battery goes kaput, hope that it’s not a costly replacement, as in 15 to 20K, and also not covered by warranty.

[Ernest]

Depends on a few things, but mostly what’s the loan rate? Sometimes you’ll get a low rate(0%, 1%, etc.) – but usually on hi priced new cars. The very 1st new car we bought – we put down the most the dealer would take on a credit card.

We got points for putting down $2,500 on our Costco Visa.

The dealer didn’t offer any special loan rates – we wired the balance in cash.

Even though this was a new car purchase – we paid used pricing. MSRP was $44K; after all discounts – we paid $23K out the door/all in.

[David]

Depends on the interest rate. I can average 10% in the market with my index funds.

So, if it’s lower than that most of the time I’ll take the loan.

[Paul]

Less than 5% interest rate, I’d get a loan. More than 5%, I’d pay cash

[Author]

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