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-- Posted: Jan. 18, 2001

Dorothy Rosen -- The Dollar Diva Ask the Dollar Diva

Is it wise to buy a car with cash?

Dear Dollar Diva,
Is it ever wise to buy a car with cash instead of a loan?

Frank


If there is enough money in your bank account to pay for the car and you will still have enough left over for emergencies, why not pay cash? A cash customer is in a stronger negotiating position, so he can get a better deal, and who needs monthly car payments?

Develop a cash mentality

Folks with a cash mentality spend less than they earn, and save or invest the difference. When they need a new washing machine, or roof, or car, they take the money out of bank or money market account for it. They hate paying interest, because they think of it as paying for nothing.

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The only interest that a person with a cash mentality doesn't mind paying is mortgage interest, especially if he gets a nice tax deduction because of it. But as soon as he has enough saved for emergencies, and is satisfied that his investments will take care of his long-term goals, you'll probably see him making extra payments on his mortgage. If you have a cash mentality, you usually want to be mortgage-free when you retire.

Developing a cash mentality is a good way to stay financially healthy, and accumulate wealth. The Diva recommends it.

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