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Comment by buescher | Hacker News Reader

Middle class perspective: if you can buy a car for cash, but you can get a good interest rate on a loan, you may be better off taking the loan. The opportunity cost of having cash sunk into the car can be greater than your financing costs.

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The problem is most people buy more car than they can afford when they finance it. If I have to save $10,000, and I have it in my mind that I don't buy things on credit, I'm only going to buy a $10,000 car. But if I have $1,000 for a down payment and the car dealership talks me into a $30,000 car with zero down, I might take that deal.

True, but a complementary problem is that your $10000 used car is probably overpriced, driven up by the demand for lower-cost-up-front cars. Edmunds' 5-year TCO on a 2015 Corolla is only about $20/month less than that of a 2021 Corolla. There have been years where their estimate was for slightly higher TCO on the five-year-old car.

A basic, simple loan like this also is often good for your credit record.

Unless your credit score is absolutely perfect, the APR on a used car loan is easily 8-10%

That's a pretty big chunk of change to spend to boost your credit record

https://www.bankrate.com/loans/auto-loans/rates/

Right I was thinking about new car loans which I've seen at zero, which is why it makes sense to work the money somewhere else.

Yeah, that's another way it costs to be poor. But you can read that page as "a new car loan can be as low as 4.2%, even if you only have fair-to-good credit".

It can still make sense to hang on to the cash if you don't otherwise have a cash reserve.

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