Greetings! My family member is planning to purchase a used 2014 Honda CRV with 26,279 miles for 14 grand plus fees. She is planning to take it to a local mechanic to have the safety check done.
The question to the community is: whether to take a loan or pay cash?
What are the benefits of taking a car loan? Would it be cheaper to pay cash? Please advice. Thanks
Happy Holidays!
Good idea to take it to the mechanic, but do it before you buy it. The loan vs cash depends on your situation, if you are earning more on your money than the interest rate on the loan, borrow the money. If you are not earning much on your cash pay cash. But a lot depends on your personal financial situation and personal feelings on how to handle money.
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I agree with the mechanic check. Also agree on the fact that the loan depends on what you are doing with your cash and how much it is earning. In my case I always pay cash and call it a day.
If you think by having a loan you will have some recourse if the car turns out to be a lemon; it is not true, does not matter, the financial institution will want its money anyway.
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It depends on where the money is coming from. If from an IRA or CD the penalty might be more that the loan interest and possible taxes on the withdrawal. If out of a plain savings account just pay cash.
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Stocks and mutual funds might be a better bet than a car loan, might being the operative word, I sold stocks to pay for new windows, we are not financial advisers, but 2% interest on savings vs 6% interest on a car loan, you loose money by taking a loan, if it means you have no cash for emergencies by paying cash, that is another facet.
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You want a pre-purchase inspection NOT a safety inspection. A pre-purchase will cost more but will be more intense and inspection than just a safety. Plenty of cars that are in horrible mechanical shape but have a valid safety sticker on them. With a 2014, you might be just fine, but why take that chance with $14k on the line.
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If the buyer doesn’t have a credit rating yet, taking out a loan and paying every installment on time is a good way to create an excellent rating. A monetary estimate is just like @Barkydog says. Compare the return wherever the money is stored now against the cost of the loan. If the current return is low risk and higher than the loan rate, then the loan is the way to go. That situation really only occurs during periods of high inflation, and we definitely are not in one now. I always pay cash for my cars because I can’t reliably earn as much during the loan period and because it keeps me from spending too much.
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I wonder if someone has the ability to pay 14000.00 cash for a used car why not make a large down payment and get a new vehicle with full warranty.
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Someone has 14 grand and doesn’t want to take out a loan.
I did this when I bought a used car for my daughter to use. They wanted $10,000 for it, and I wrote a check on a two year old car.
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Hmm, would it be better then to just try to get a brand new CR-V, or one that’s just a couple of years old, from a dealerhip? Don’t think that thought even crossed the mind 
curious for others thoughts!
That is a decision for the person buying the vehicle. This is one of those things where the less you are involved the better chance you have of retaining a friend .
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A new CR-V will cost twice as much as the used one you are looking at. Will it last twice as long? I doubt it. And, if you sell the new one in 4 years it will be worth about half what you paid (buy for $28,000, sell for $14,000). If you sell the used one in 4 years will you lose $14,000 on the deal? Highly unlikely. Used cars are almost always cheaper than new cars in the short and long run.
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It will be cheaper to pay cash - no interest, you’re not required to carry collision because of the lien, and so forth. HOWEVER, if you use all your savings to pay cash, that may not work out. You will have some unexpected expense (heat pump goes out, someone breaks a bone in an accident, etc.) in the next year that you will need that cash.
There’s no one-size-fits-all for purchasing a car. Ideally, you should be saving a little all along for your next car purchase, but life certainly is not ideal.
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I was checking truecar just for fun and in my area if you get the base trim CRV brand new (2018), it would be close to $24K plus fees. So a 2014 for ~40% less sounds fair to me.
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Merry Christmas!
Went to the Honda dealership with my family member. Test drove a 2017 CRV Lx. It was a basic car without any bells and whistles. The price after discounts was 24 grand. Still debating between new or used, but likely won’t get a new car at the standard model because it does not have any of the safety features or security system. Thanks to everyone for their help and guidance.
And for what it’s worth, we own a 2014 CRV, and I have been very pleased with it thus far.
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I guess I’m really not understanding the question, or better put, why it was asked. OF COURSE take to a qualified mechanic that you trust to have it checked out and OF COURSE it’s better to not pay interest than it is to pay interest if you have the funds to negotiate a cash deal up front. What you have to watch for is that many places would rather you pay interest and so you really have to do your homework on what the real value of the car is and be willing to walk away if they’re wanting more than it’s real value and your willing to pay cash up front. Otherwise, if you have a pretty sure income, finance it and keep your savings.
Things to watch for on foreign cars in the US, they make them lighter by making the steel a thickness thinner. If you live in Michigan, like I do, the roads destroy cheaply build cars. The cradle will be cracked and rusted away much earlier than say a Chevy truck for example. It’s just how they managed to make them lighter. Buicks often had aluminum cradles, saved a lot of weight, was actually a pretty good idea. The other thing to look for is a lot of wear on wear items vs. the milage on the odometer. It’s pretty hard to clip mileage compared to the older cars but it still can be done. Look for excessive wear on the brake pedal…you can’t have a ton of wear on the rubber over the brake pedal and only have 20k miles right? It’s just not possible. Little stuff that they think you’ll miss will tell the story about it’s condition. Best of luck with your friend or whoever you said was buying it. Bottom line, do your homework and don’t pay more than it’s worth, interest or cash.
Wayne
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And so what , a crash will need to be repaired and thickness has nothing to do with rust protection.
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It’s so easy to say the kind of things @jaded13640 said. It’s also pretty much meaningless. Sure, some vehicles are made in the US and some are made in other countries, but mostly, for each maker, it’s a mix. Most Toyota trucks are made in the US, lots of Fords and GM trucks are made in the US, Canada or Mexico. The CR-V is made in Japan, I think, but most Honda cars are made in the US.
And there’s little real broad based research that strength, safety or reliability is linked to where a vehicle is assembled. That sort of information comes from things like Consumer Reports, and does not support the idea that vehicles engineered or manufactured by foreign corporations are worse that US corporate products. In fact, it seems like Japanese products are more reliable generally, although it pays to do your research.
Lots of 3 or 4 year old vehicles are on the market because they are lease returns. Some have low mileage because they had limited leases. They can be a worthwhile purchase. My guess is that many have limited maintenance because the lessors and lessees really don’t care about things like oil changes.
You pays your money and takes your choice.
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I don’t have the vehicle in my shop and on my hoist so I have no choice but to speak in generalities. One thing to watch for, on any car, is excessive rust or damage to the engine cradle. I don’t care who built it. This is a Japanese vehicle so I put it in terms of that vehicle. The US auto makers have done the same thing, make them thinner, which makes them lighter and liter is better for fuel ecomony but it sacrifices strength. Especially in the long term. Our roads here beat the crap out of everything. When you have something that was build out of thinner steel AND you live were the roads are crap, it’s more susceptible to bending and flexing. Anywhere where it’s bent and flexed, over time will be even weaker yet. It’s the same theory as bending a coat hanger, after several bends it snaps. I’ve had to replace numerous Honda cradles that just rusted to the point where you could flex areas with your bare hands. I’m not trying to insult any make or anything, it’s just what I’ve seen and something I would suggest people look for when considering buying a car. It’s just advise based on my experience, take it or leave it. But no insults were intended at all.
Wayne
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