Buying Car with Cash

Monday, September 8, 2014

I seldom post about Financial but recently I read an article on Costco Magazine that got my attention.

A reader asked Suze Orman this question on the Personal Finance section:
Regarding purchasing a car should I:
a. Buy a $33,000 car new with 0% interest over 5 to 6 years, with 50% down payment?
b. Buy new using a home equity loan, with an interest rate of 3 to 4 % with the same down payment? Or
c. Buy used with the same down payment?
Which option saves me the most money and/ or costs me the least? 

The question puzzled me because 50% down payment of $33,000 = $16,500. I wonder if the person realizes with that amount, he/ she can buy a used car with cash. In fact, that's over the amount we paid for our then five-year-old van, which would cost us over $30K if we bought a new one. For further reading, here is a great article titled: 6 Reasons to Buy a Car with Cash.

Turned out Suze Orman agrees with me. At the end she wrote the statement below that summed up her answer: