I can pay cash for my new G, but is it better to finance, then pay it off right away (to build credit)?

 

only if you need to build credit.... also check to see if you can qualify for 0-1% financing....then use the money for something else...

 

Even though I can pay cash for my cars, and have in the past, I will finance my G when it arrives for several reasons-the 2.9% financing, I just finished making lease payments at around 550 a month, so that amount is already built into my monthly budget, and most importantly if I were to take out $35K cash from the bank, somehow it never gets replaced. I plan on putting 11k down (which is the amount I plan on getting from selling my current car) and financing 25K over 60 months which comes out to $450 or so a mo. which is better than a lease because I can sell the car whenever I choose. I have a long history of good credit so for me credit doesn't come into play, but if you don't have a long or solid credit history that is another good reason to finance and pay off.

 

checkbook.org says that there is 1.9% up to 36 months and 2.9% up to 60 months on 2004 G35's both 2 door and four door. (Thru 3/31) There is no financial incentive indicated for 2005's. Of course, there are other places to finance thru.

 

It's a bit of a Catch-22, until it is paid off, your available credit will be reduced, and it may take a bit of time to update. Basically, a $500 / month (for example) car loan or lease will reduce your available borrowing by that amount when your DTI (Debt to Income) is analyzed.

So, for example, If you're planning to buy a house that will be a financial stretch, building your credit will help, but while the loan is active, (and for a little while after) it will be a negative.

Enjoy the car,

Tony

 

It really depends on your situation. If you need to build your credit then go for it as long as you get a decent APR. Say you don't need to build credit, it all comes down to opportunity cost. If you can finance the car for say 0%-2% you might want to finance and put the cash somewhere else that can yield you an aftertax return of more then 2%, which shouldn't be that hard. So it comes down to opportunity cost. If you want me to elaborate further let me know.

 

In 2003, I financed my G35 at 3.4%.

Though in my case I didn't have the available cash to pay it in full, I was still able to put $10,000 down.

I went with the 60 month term because it was no higher than a 48 month term, and 3.4 was still pretty low. I still wanted to leave some savings for emergencies.

The "smart" thing to have done was to keep my old car, or buy some other, used car, where I could have paid cash

 

Incorrect. If you check infiniti.com under financing and then under current offers you will see that there is 1.9% and 2.9% financing by Infiniti for the 05 sedans til 3/31/05.

 

It's obviously cheaper in the long run if you pay cash for it. The problem that I have with that is, unless you have liquid assets over $100K, you're depleting your cash reserves for a depreciating asset. My suggestion is to try and qualify for the 1.9% (36mo) financing and pay it off that way. You'll keep your cash reserves and pay only a modest amount of interest.

Good luck.

 

I agree with you cls2g35. I think the problem he will run into is if he has no credit history, there is no way IFS is going to finance him at 2.9%

 

Yup, checkbook.org does not list the 05 Sedan.

 

"I can pay cash for my new G, but is it better to finance, then pay it off right away (to build credit)?"

CLS2G35 is correct. While there are many things to consider your opportunity cost should probably be first on the list. Its is counter productive to take money out of an investment that offers an after tax return that is greater than the interest rate of your loan. If you do you are essentially choosing a lower [or zero] return investment.

For example, if you earn 5% after tax on the money you currently have invested but pay 2% on what you borrow for your car your return on that money is 3%;[+5 -2 = 3]. If you pay cash you don't owe 2% but you also don’t earn 5% so your return on that money is 0% [not counting the depreciation on the car, etc] and your credit score doesn’t change. Think of it another way, would you be willing to borrow $1M at 2% if you could invest it and get an after tax return of 5%? If the answer is yes then don’t pay all cash for the car. The numbers are smaller based on the price of the car but the principle is the same.

I had enough cash to go all in for my car but chose to finance $30k at 1.9% for 3 years because: the interest rate was so low [less than inflation]; I wanted to build my credit score; and I wanted the flexibility of having that cash on hand. By holding on to the cash I still have the option of paying off the loan any time I want or investing it in something else that offers a better return. If I went all cash I lose the flexibility because I can’t borrow against the equity in the car.

As for your original idea, I am 99% sure that opening up a line of credit and then paying it off immediately will do nothing for your credit score because your credit score takes into account payment history [and a number of other things]. While borrowing $30k and paying it off is a good thing, creditors want to see a payment history to show that you can manage debt over a period of time. Maybe someone more familiar with how credit scores are actually calculated could clarify this.

 

From a purely empirical perspective, what Kona says is all true, but everyone has to admit that there is something empowering about paying your relatively new car off (with your own money, not a HE loan).

I only buy cars that I could afford to pay cash for, and normally pay on them till they hit the 2-3 year/10kish mark...then pay them off. Sure, all the financing is on the front-end...but when your talking about 2-3% (drove GM cars before this, so 0% was the norm), the financing charges are barely a $1000.

Because I'm in such a volitale feast/famine industry (semis), it's more of a psycological thing to pay off the cars and know that if times turn bad, that there is a large monthly payment I don't have to worry about.

 

Exactly. I put about $20k down on my 05 and financed the rest. I had the cash for the whole amount but I figured I'd rather invest the money and get a return on it. With the low interest rate I got and the amount of money I put down, I will have it payed off in 3 years and some a return on the cash that I saved.

 

well i have seen my dad work... pretty much if u buying... pay cash, easier to negotiate...