Sunday, June 15, 2008

Don't Buy Cars on Credit?

After reading my personal Finance book, Personal Finance for Canadians for Dummies, I want to comment on a concept that is mentioned quite a few times in the book. It says to never buy things that depreciate in value (such as a car) on credit. Now this makes perfect sense of course, and I totally understand why it tells us this, but how realistic is it?

How many people do you know who saved up like $20,000 or more for a new car? You don't have to buy a new car of course, but I'm just saying. I don't think this is a realistic way of looking at things. What if you get a great new job offer and for this job you need a car, either because the job requires travelling, or because the job is just in another town? Maybe you don't have a lot of money saved for this car, but you need to get a loan to get the car to have your new job and make money. And since you need a car for work, you can't just buy any old car you need a good reliable new or hardly used car. Would you go get a loan for a car? Of course you would.

Of course that is not the only situation in which you would need a car, it is just one of the many examples. I personally do not know anybody who paid for a car in cash, new or used.

What do you guys think about this? Have you ever paid cash for a car? And if so how long did you save for?


Henna said...

I totally agree with your point in that the advice isn't realistic but at least it reminds people that they should try to save up as much as they can for a car. They may not be able to pay for the whole car themselves, but if they can at least put a majority of money down, then that's still better than nothing, right?

MP said...

My sister and her husband buy cars using only cash. When I buy cars on credit, I only buy when it is a special promo and never more than 1.9% financing - if possible, 0% - then I make use of my available cash to earn money.