Buy a car for cash or get a loan and buy more real estate?

[Heidi Hughes]

Hi BP Community,

Here's a random question.  I have a TDI Diesel car that VW is buying back for approximately $28K.  I am looking for a replacement car.  I was thinking it would be nice to use that cash towards another property! But, I can't do without a car.  Dealers are offering 0-1.5% financing.  Should I do a car loan for the next couple of years and use the 28K to buy another rental property?  I have my own company and write off a portion of my car.  Not usually a fan of car loans or leases but I am tempted with OPM that's so cheap.

Thanks,

Heidi    

[Jim D.]

I would echo the advice to buy a quality used car in the 5-10k range and invest the rest of the money.

As a side note, anytime you see lower than 5% interest on consumer products like cars, jewelry, solar panels, whatever... it is always done by the retailer increasing the price and using that money to buy down the interest rate. So you're not actually getting a great rate or great deal--you're paying for it in the purchase price. The supposed "cash discount" is just them not incurring the financing fees to buy the rate down.

Typically costs about 5% extra to buy the rate down to 0% for per year.