Is there a financial incentive for a one percenter to finance a new Volvo vs just buying it?
Not a one percenter, but no car loans for a while now.
May depend on if you mean an income 1%er versus a net worth 1%er.
How does that change the answer? Serious question. Sometimes folks say mortgage interest is a good thing for the deduction. Am I missing something about car financing?
I don’t know if it’s smart or not, but we only buy cars with cash. No financing ever, not in 30 years of marriage.
Some of the income 1%ers may be financially overstretched due to high spending habits, so they “have to” finance their cars to “afford” them. But a net worth 1%er may see the price of a car as pocket change (relative to his/her net worth) and not worth bothering with monthly payments for, so s/he may just write one check for the entire price.
My basic question is regarding car loan interest. Does it ever make financial sense to pay it, if you don’t have to?
I understand there may be other excellent reasons to finance cars. I have financed cars when it was the only way to afford dependable transportation.
One has to do the math with car financing. Is the cash back incentive more than the interest one pays or not? If there isn’t a lower price to pay cash, then one only has to consider what interest they would make investing the same amount of money - does one earn more interest than they spend? It’s no different than any other leveraged debt.
Our middle son bought a new car last year when he went to the dealership to buy a used one. Ford had special financing for college grads with good credit and it offset the price of the fairly used new car he had in mind (with higher interest financing due to being used) - plus had the bonus of being new so a full warranty, etc. We wanted him to have a reliable car instead of a beater for med school in the snowy north. He could have paid cash for an older used car if we hadn’t cared about reliability, but just put that down on his new one instead. It should last him through med school and residency and possibly more.
A more interesting question is “Why Do the 1 Percent Feel So Insecure?” (psychologically, not financially). A real advantage of being rich is being able to afford anything they value without apologizing or explaining themselves. No need to start a pissing contest of who is more frugal. No need to preach that traveling the word is morally superior to owing a six-figure collection of designer purses. No need to explain buying a $100K car by saving the environment. No need to justify mega-mansions by making charitable donations. This is a false dichotomy - most rich people spend some, save some and donate some, yet somehow they don’t feel secure to discuss one without the other.
Of course, conspicuous consumption is a choice and, like all choices, it has consequences. If their spending habits make people uncomfortable, they should change their choices rather than explaining them. I feel privileged to pay for anything I want (which is much less than we can afford). I also own these choices and have no regrets or apologies. I would probably feel different if I inherited or married into money, or have done something indecent to earn them. People are not stupid, they can see the good, the bad and the ugly…
I found many people worship wealth, and it is not uncommon to see some people equate wealth with values or even virtues. So it is not surprising that some people do stupid things to try to emulate riches (living lavishly on credit), and could not really differentiate the good from the bad and the ugly…
“Just passed the 100K mark on my Volvo”
250K+ here. 
Take care of it and you’ve got many more miles to go.
“Is there a financial incentive for a one percenter to finance a new Volvo vs just buying it?”
We typically pay cash but did finance one of our Volvos as it was cheap $ at 1.9% interest. Played the arbitrage.
We have been able to get financing for less than inflation. Why pay current cash for a vehicle that depreciates quickly?
So I don’t have to sit in the finance guy’s office for 3 hours while he tries to sell me maintenance packages, extra warranties, rust protection, paint protection, etc. 8-|
I can’t bring myself to buy a new car. But a close relative needed a car for his new job and I was eyeing new technology. I sold him my 2011 Forester for a good price for him and bought a 2016 Outback at CarMax. I have to say that the back-up camera is a game changer and let’s not even talk about the sound system. I was driving around without those features and I was happy, but not as happy as I am now, knowing he’s got a reliable car and I have technology.
@wellspring backup cameras can be added after market. My husband just today installed a back up camera and compatible stereo with blue tooth, etc in my oldest daughter’s 2010 Camry. All parts cost just over $350 from Crutchfield. We also put one in our 2006 Corolla (that the teenager drives) a few months ago. Definitely love having backup cameras.
“Why pay current cash for a vehicle that depreciates quickly?”
Except for that one time, we do pay cash. We don’t worry about depreciation because we hold onto them, take care of them, and drive them for a long time.
I also negotiate like heck. I also let them know up front that I’m not buying that extra stuff so they don’t waste their breath. Last car we bought, most of the time spent in the finance guy’s office was him asking for advice on his personal investing/401K.
I have financed a car once, when I was just starting my profession and could deduct the interest (didn’t have many other deductions). I also paid by a 0% interest credit card, cash back credit card and a check once (paying off the entire credit cards before any interest or finance charges accrued). I have never talked to any “finance folks” about cars. To my knowledge, I have never missed out on any financial incentives by paying for my two new from the dealer cars in these manners.
If and when we buy a car, we will likely pay for it all cash up front unless there’s some amazing incentive for doing something else.
The only time we didn’t pay cash for a car was when there was 0 percent financing and banks were routinely paying 4 percent interest. We took the money for the car and put it in a separate bank account and the loan was paid out of there every month.
That’s what I was thinking about, @maya54 - if you can make more with the $ in your investment accounts than you pay in interest. That might be a time to finance.
It’s honestly not difficult to do the math once one has the numbers. All one needs is:
This is how much the car costs if you pay cash today.
This is how much the car costs if you finance it at X% for Y years today - coupled with this is the amount I’m taking home instead of paying - the investable amount…
This is how much I can expect to get for investing the difference.
We’ve done it both ways as one really doesn’t know what the answer is until the numbers can be crunched. Either way we’ve done it the sales person has asked us about all the add ons. Paying cash doesn’t stop that. Telling them you’re not interested in them stops that.
Back up cameras are essential in any vehicle I purchase from here on out. 
I wish my lad’s Forester had one, but he doesn’t feel the same need I do - even for an add on. I suppose my need might come from my age.
So I don’t pay interest on something that depreciates quickly. Buy used, pay cash, invest those would-be car payments.