Repair-It

Adam wrote:That might already be happening. Or at least KBB isn't keeping up with things. The book value is only $3900.

In my opinion, KBB has never accurately reflected the value of rare Hondas that are in good condition. For example, if you looked up the value of my former Integra Type R, it would probably be less than half of what the car is actually worth. I think all the salvage title and heavily modified junk in the market pushes the values down on KBB.

This is an older article but it contains interesting statistics: http://www.thecarconnection.com/news/10 ... y-next-car

The question the article speaks to is, should you pay cash for your next car?

If want to pay cash for an affordable car, you're likely to be given alien stares around the dealership. That's because some dealerships expect to earn hundreds—in some cases thousands—of dollars per loan written. In any car, make sure you talk about financing after a price has been agreed upon.

As Jesse Toprak, vice president for industry trends at the pricing-intelligence firm TrueCar, points out, if you're not careful and accidentally disclose that you'll be paying cash, you might end up paying hundreds more for the vehicle.

This is a great point and counterintuitive to the idea that telling the dealership you can pay cash should get you all kinds of red-carpet-rollouts. But their reasoning makes sense. And paying cash for regular cars is rare, as the article states. Like 6%. Luxury brands have more cash transactions.

I'd like to see more statistics on leases but the article states that BMW and MB have about a 50% lease transaction rate.

Put simply, as long as your auto-finance rate exceeds what you could (or at least might) receive from an alternative investment, it will make sense to pay cash for your vehicle.

Of course there are lots of exceptions to the rule. Would you rather have that money free just in case? And what if interest rates or earnings on investments suddenly become much more attractive during the course of your loan? Not likely, but possible. And then there are other sweetheart incentives that knock money off the price only if you finance through an automaker's captive finance company. In that case—if there's a $1,500 incentive, for instance—it could pay off.

For me, the ability to pay cash is a good indicator of whether I consider a car "affordable" or not.

I paid cash for the Prius, but I considered financing since Toyota was running a 0% deal around the time I purchased. Unfortunately no dealer would give me 0% AND a good price. By foregoing the 0%, I was able to get the price down $1000-1500 depending on the dealer. I probably could have earned more than that amount in one year had I invested the purchase price of the car in an index fund at the start of 2013. I never feel like I have perfect foresight when it comes to investing so I just took the guaranteed savings up front.