January 31, 2013 4:38 pm
I am planning to get a car soon. I wanted to know which is better. Pay full cash or get a loan, it being a depreciating asset n all?
Dear Radheesh, thanks that I was able to help you out. Please keep asking.
Dear Radheesh, I’m unable to understand the logic to purchase a depreciating asset on a loan & thus incurring double loss. The depreciation in asset’s value itself as well as paying interest for the loan. In case you can earn more than the car loan interest then only it make sense to go for loan. Now as the car loan rates are running near 12%, how much high can you earn from here on wards?
Show me the money dear. 🙂
Ashal, U know what, when u say it that way, it makes sense. Sometimes it just doesn’t strike and I thank you for clarifying. I am clear and will go on getting my car with hard cash. 🙂
Dear Radheesh, as you are not a businessman, the associated expenses of a Car as well as it’s loan’s interest ‘ll not be available for set off against your income. Please purchase car on out right cash basis.
Hi Ashal, Thanks for the response. Considering that the car loan/expenses dont hurt me , would you still say the same? I ask coz one of the Fin Planners told that me that depreciating assets should not be bought with out right cash and always better to pick up a loan and he went on providing me a big explanation for it as well. I thought i’d have a second opinion. Thanks 🙂
Dear Radheesh, are yoiu in service or a businessman?
Hi Ashal, I am into Service Industry. Not Business.
Get a used car so that you don’t pay for the steep initial depreciation. Paying cash is any day better than a loan. If cant do so straight away you can save up for it if the car can wait. If you need the car badly you can get a used-car loan.
To get a feel for the depreciation and why it doesn’t make sense to buy a new car with a loan use this calculator
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