New car cash vs finance
Yes, maybe. Sometimes the mother company (that makes the car) covers a bit of the loss that comes from the super-offer loan, so the dealer loses a bit less. But generally, you are right. you should be able to talk them into some rebate that gets you around the given number, depending on how good you are a negotiator (and how urgently they need to sell a car) "The question is about the dealer, right?  The dealer isn't providing this financing to you, Alfa is, and they're paying the dealer that same ""On the Road"" price when you finance the purchase.  So the dealer gets the same amount either way. The financing, through Alfa, means your payments go to Alfa.  And they're willing to give you 3,000 towards purchase of the car at the dealer in order to motivate those who can afford payments but not full cash for the car.  They end up selling more cars this way, keeping the factories busy and employees and stockholders happy along the way.  At least, that's how it's supposed to work out."
"New car loans, used car loans, and refinances have different rates because they have different risks associated with them, different levels of ability to recoup losses if there is a default, and different customer profiles.  (I'm assuming third party lender for all of these questions, not financing the dealer arranges, as that has other considerations built into it.) A new car loan is both safer to some extent (as the car is a ""known"" risk, having no risk of damage/etc. prior to purchase), but also harder to recoup losses (because new cars immediately devalue significantly, while used cars keep more of their value).  Thus the APRs are a little different; in general for the same amount a new car will be a bit lower APR, but of course used car loans are typically lower amounts. Refinance is also different; customer profile wise, the customer who is refinancing in these times is likely someone who is a higher risk (as why are they asking for a loan when they're mostly paid off their car?).  Otherwise it's fairly similar to a used car, though probably a bit newer than the average used car." "The mix how how you present this feels contradictory. You would pull a 'major' portion from the emergency fund (EF), but at the same time, you'll replace it in a month.  The first bit scares me, this is not the purpose of that fund, and the issue is the aspect of money that's psychological. Money is a habit, if you justify this use of the EF now, it gets progressively easier for this purchase or that, and the fund loses its intended purpose. If the second half is accurate, that your income would replace that money in a month, i'd say the fund wasn't fully funded to its proper level, 6-9 months of all expenses to get you though issues as bad as a job loss.  The great thing I see in your question is what's missing. You're not looking to buy a car with a loan. That puts you in a good situation, and should push those answering to cut you some slack on the one month ""bridge loan"" from your own savings.  Edit - OP add 2 key points, His EF is 3 years expenses (wow, kudos to him!), but he's living like a student (i.e. with parents, which keeps his costs low). If this latter observation seems judgmental, I'll re-edit. The finances of everyone would be far better off if we adopted multigenerational living. The young could save as Fahad is doing, and when parents retire, they can know they are cared for. In the US, I'd say ""when you move out, your expenses will go up drastically,"" but in this case, that may not happen, or not soon. This is my observation the world is a big place and our answers need to fit the OP's situation, not assume our own standards apply to all.  Buy the better car. You saved. You earned it." "Yes, he can retract the offer - it was a cash-only offer, and if you're financing, it's no longer ""cash"". Unless, of course, you get the financing through your local bank / credit union, and they hand you a check (like on a personal loan). Then it's still cash. However, the salesman can still retract the offer unless it's in writing because you haven't signed anything yet. The price of financing will always be higher because the dealer doesn't get all their money today. Also, if you finance, you are not paying just the cost of the vehicle, you are paying interest, so your final cost will be higher (unless you were one of the lucky souls who got 0% financing atop employee pricing, and therefore are actually saving money by having a payment)." "Your son is in the right. But he broke the ""unwritten"" rules, which is why the car dealer is upset. Basically, cars are sold in the United States at a breakeven price. The car company makes ALL its money on the financing. If everyone bought ""all cash,"" the car companies would not be profitable. No one expected anyone, least of all your son, a ""young person,"" to pay ""all cash."" When he did, they lost all the profit on the deal. On the other hand, they signed a contract, your son met all the FORMAL requirements, and if there was an ""understanding"" (an assumption, actually), that the car was supposed to be financed, your son was not part of it.  Good for him. And if necessary, you should be prepared to back him up on court." The car dealership doesn't care where you get the cash; they care about it becoming their money immediately and with no risk or complications. Any loan or other arrangements you make to raise the cash is Your Problem, not theirs, unless you arrange the loan through them. It is almost never going to be more economical to buy a new car versus repairing your current car. If you want a new car, that is justification enough. The other answers have offered some great advice, but here is an alternative that hasn't been mentioned yet. I'm assuming that you have an adequately-sized emergency fund in savings, and that your cars are your only non-mortgage debt. Since you still have car debt, you probably don't have anything saved for buying a new car when your current cars are at the end-of-life. Consider paying off your car loans early, then begin saving for your next car. Having cash in the bank for a car is very freeing, and it changes your mindset when it comes time to purchase a car, as it is easy to waste a lot of money on something that depreciates rapidly when you aren't paying for it immediately.  This approach might be counterintuitive if your car loan interest rate is less than your mortgage rate, but you will probably need another car before you need another house, and paying cash for a car is worth doing. "Lachlan has $600 cash and a car worth $500. That's $1,100. The new car is priced at $21,800. Lachlan needs a loan for $20,700. However, the finance company insists that the buyer must pay a 10% deposit, which is $2,180. Lachlan only has $1,100, so no loan.  The car dealer wants to make a sale, so suggests some tricks. The car dealer could buy Lachlan's old banger for $1,500 instead of $500, and sell the new car for $22,800 instead of $21,800. Doesn't make a difference to the dealer, he gets the same amount of cash. Now Lachlan has $600 cash and $1,500 for his car or $2,100 in total. He needs 10% of $22,800 as deposit which is $2,280. That's not quite there but you see how the principle works. Lachlan is about $200 short. So the dealer adds $1,200 to both car prices. Lachlan has $600 cash and a car ""worth"" $1,700, total $2,300. The new car is sold for $23,000 requiring a $2,300 deposit which works out exactly.  How could we have found the right amount without guessing?  Lachlan had $1,100. The new car costs $21,800. The dealer increases both prices by x dollars. Lachlan has now $1,100 + x deposit. The car now costs $21,800 + x. The deposit should be 10%, so $1,100 + x = 10% of ($21,800 + x) = $2,180 + 0.1 x.  $1,100 + x = $2,180 + 0.1 x : Subtract $1,100 x = $1,080 + 0.1 x : Subtract 0.1 x 0.9 x = $1,080 : Divide by 0.9 x = $1,080 / 0.9 = $1,200 The dealer inflates the cost of the new car and the value of the old car by $1,200. Now that's the theory. In practice I don't know how the finance company feels about this, and if they would be happy if they found out." The only reason to lend the money in this scenario is cashflow. But considering you buy a $15000 car, your lifestyle is not super luxurious, so $15000 spare cash is enough. Not long after college in my new job I bought a used car with payments, I have never done that since. I just don't like having a car payment. I have bought every car since then with cash. You should never borrow money to buy a car There are several things that come into play when buying a car. When you are shopping with cash you tend to be more conservative with your purchases look at this Study on Credit card purchases.   A Dunn & Bradstreet study found that people spend 12-18% more when using credit cards than when using cash. And McDonald's found that the average transaction rose from $4.50 to $7.00 when customers used plastic instead of cash.  I would bet you if you had $27,000 dollars cash in your hand you wouldn't buy that car. You'd find a better deal, and or a cheaper car. When you finance it, it just doesn't seem to hurt as bad. Even though it's worse because now you are paying interest.  A new car is just insanity unless you have a high net worth, at least seven figures. Your $27,000 car in 5 years will be worth about $6500. That's like striking a match to $340 dollars a month, you can't afford to lose that much money. Pay Cash If you lose your job, get hurt, or any number of things that can cost you money or reduce your income, it's no problem with a paid for car. They don't repo paid for cars. You have so much more flexibility when you don't have payments. You mention you have 10k in cash, and a $2000 a month positive cash flow. I would find a deal on a 8000 - 9000 car I would not buy from a dealer*. Sell the car you have put that money with the positive cash flow and every other dime you can get at your student loans and any other debt you have, keep renting cheap keep the college lifestyle (broke) until you are completely out of debt. Then I would save for a house.  Finally I would read this Dave Ramsey book, if I would have read this at your age, I would literally be a millionaire by now, I'm 37. *Don't buy from a dealer Find a private sale car that you can get a deal on, pay less than Kelly Blue Book. Pay a little money $50 - 75 to have an automotive technician to check it out for you and get a car fax, to make sure there are no major problems. I have worked in the automotive industry for 20 + years and you rarely get a good deal from a dealer. “Everything popular is wrong.”         Oscar Wilde I am going to give advice that is slightly differently based on my own experiences. First, regarding the financing, I have found that the dealers do in fact have access to the best interest rates, but only after negotiating with a better financing offer from a bank. When I bought my current car, the dealer was offering somewhere around 3.3%, which I knew was way above the current industry standard and I knew I had good credit.  So, like I did with my previous car and my wife's car, I went to local and national banks, came back with deals around 2.5 or 2.6%.  When I told the dealer, they were able to offer 2.19%. So it's ok to go with the dealer's financing, just never take them at face value.  Whatever they offer you and no matter how much they insist it's the best deal, never believe it!  They can do better! With my first car, I had little credit history, similar to your situation, and interest rates were much higher then, like 6 - 8%.  The dealer offered me 10%.  I almost walked out the door laughing.  I went to my own bank and they offered me 8%, which was still high, but better than 10%.  Suddenly, the dealer could do 7.5% with a 0.25% discount if I auto-pay through my checking account. Down-payment wise, there is nothing wrong with a 35% down payment.  When I purchased my current car, I put 50% down.  All else being equal, the more cash down, the better off you'll be.  The only issue is to weigh that down payment and interest rate against the cost of other debts you may have.  If you have a 7% student loan and the car loan is only 3%, you're better off paying the minimum on the car and using your cash to pay down your student loan.  Unless your student loan balance is significantly more than the 8k you need to finance (like a 20k or 30k loan). Also remember that a car is a depreciating asset.  I pay off cars as fast as I can.  They are terrible debt to have.  A home can rise in value, offsetting a mortgage.  Your education keeps you employed and employable and will certainly not make you dumber, so that is a win.  But a car?  You pay $15k for a car that will be worth $14k the next day and $10k a year from now.  It's easy to get underwater with a car loan if the down payment is small, interest rate high, and the car loses value quickly. To make sure I answer your questions: Do you guys think it's a good idea to put that much down on the car? If you can afford it and it will not interfere with repayment of much higher interest debts, then yes.  A car loan is a major liability, so if you can minimize the debt, you'll be better off. What interest rate is reasonable based on my credit score? I am not a banker, loan officer, or dealer, so I cannot answer this with much credibility.  But given today's market, 2.5 - 4% seems reasonable. Do you think I'll get approved? Probably, but only one way to find out! I have gotten a letter of credit from my credit union stating the maximum amount I can finance. Of course I don't show  the dealer the letter until after we have finalized the deal. I Then return in 3 business days with a cashiers check for the purchase price.  In one case since the letter was for an amount greater then the purchase price I was able drive the car off the lot without having to make a deposit. In another case they insisted on a $100 deposit before I drove the car off the lot. I have also had them insist on me applying for their in-house loan, which was cancelled when I returned with the cashiers check.  The procedure was similar regardless If I was getting a loan from the credit union, or paying for the car without the use of a loan. The letter didn't say how much was loan, and how much was my money.  Unless you know the exact amount, including all taxes and fees,in advance you can't get a check in advance. If you are using a loan the bank/credit Union will want the car title in their name. I think you are making this more complicated that it has to be.  In the end you will end up with a car that you paid X, and is worth Y. Your numbers are a bit hard to follow.  Hopefully I got this right. I am no accountant, this is how I would figure the deal: The payments made are irrelevant.  The downpayment is irrelevant as it is still a reduction in net worth.   Your current car has a asset value of <29,500>.  That should make anyone pause a bit.   In order to get into this new car you will have to finance the shortfall on the current car (29,500), the price of the vehicle (45,300), the immediate depreciation (say 7,000).  In the end you will have a car worth 38K and owe 82K.  So you will have a asset value of <44,000>.  Obviously a much worse situation.  To do this car deal it would cost the person 14,500 of net worth the day the deal was done.  As time marched on, it would be more as the reduction in debt is unlikely to keep up with the depreciation. Additionally the new car purchase screen shows a payment of $609/month if you bought the car with zero down.  Except you don't have zero down, you have -29,500 down.  Making the car payment higher, I estamate 1005/month with 3.5%@84 months.  So rather than having a hit to your cash flow of $567 for 69 more months, you would have a payment of about $1000 for 84 months if you could obtain the interest rate of 3.5%. Those are the two things I would focus on is the reduction in net worth and the cash flow liability.   I understand you are trying to get a feel for things, but there are two things that make this very unrealistic.  The first is financing.  It is unlikely that financing could be obtained with this deal and if it could this would be considered a sub-prime loan.  However, perhaps a relative could finance the deal. Secondly, there is no way even a moderately financially responsible spouse would approve this deal.  That is provided there were not sigificant assets, like a few million. If that is the case why not just write a check? Very generally speaking if you have a loan, in which something is used as collateral, the leader will likely require you to insure that collateral.   In your case that would be a car.  Yes certainly a lender will require you to insure the vehicle that they finance (Toyota or otherwise).  Of course, if you purchase a vehicle for cash (which is advisable anyway), then the insurance option is somewhat yours. Some states may require that a certain amount of coverage is carried on a registered vehicle.  However, you may be able to drop the collision, rental car, and other options from your policy saving you some money. So you buy a new car for cash ($25K or so) and store the thing.  What happens if the car suffers damage during storage?  Are you willing to save a few dollars to have the loss of an asset?  You will have to insure the thing in some way and I bet if you buy the proper policy the amount save will be very minimal. Sure you could drop the road side assistance, rental car, and some other options, during your storage time but that probably will not amount to a lot of money. "as a used dealer in subprime sales, finance has to be higher than cash because every finance deal has a lender that takes a percentage ""discount"" on every deal financed. if you notice a dealer is hesitant to give a price before knowing if cash or finance, because every bit of a cash deal's profit will be taken by a finance company in order to finance the deal and then there's no deal. you might be approved but if you're not willing to pay more for a finance deal, the deal isn't happening if I have $5000 in a car, you want to buy it for $6000 and the finance lender wants to take $1200 as a ""buy-fee"" leaving me $4800 in the end."