Bankrate follows a strict editorial policy, so you can trust that we’re putting your interests first. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions.
Key Principles
We value your trust. Our mission is to provide readers with accurate and unbiased information, and we have editorial standards in place to ensure that happens. Our editors and reporters thoroughly fact-check editorial content to ensure the information you’re reading is accurate. We maintain a firewall between our advertisers and our editorial team. Our editorial team does not receive direct compensation from our advertisers.
Editorial Independence
Bankrate’s editorial team writes on behalf of YOU – the reader. Our goal is to give you the best advice to help you make smart personal finance decisions. We follow strict guidelines to ensure that our editorial content is not influenced by advertisers. Our editorial team receives no direct compensation from advertisers, and our content is thoroughly fact-checked to ensure accuracy. So, whether you’re reading an article or a review, you can trust that you’re getting credible and dependable information.
You have money questions. Bankrate has answers. Our experts have been helping you master your money for over four decades. We continually strive to provide consumers with the expert advice and tools needed to succeed throughout life’s financial journey.
Bankrate follows a strict editorial policy, so you can trust that our content is honest and accurate. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. The content created by our editorial staff is objective, factual, and not influenced by our advertisers.
We’re transparent about how we are able to bring quality content, competitive rates, and useful tools to you by explaining how we make money.
Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and, services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range can also impact how and where products appear on this site. While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service.
Dear Driving for Dollars,
I am retiring in about six months, and I’m planning to buy a new car. There are several ways I can finance the purchase. I can pay cash from a savings account, use certificates of deposit that are maturing or borrow from my pension with an interest rate of 3.3 percent over five years. I’m thinking the pension is the best choice due to the interest rate. The loan will reduce my monthly payout, but it is not enough to affect my standard of living. What should I do?
— Joanne Soon To Be Retired
Dear Joanne,
Your smartest financial decision is the one that will cost you the least. Paying cash for a car will cost you the least because you won’t pay any interest. But if the interest you are earning on that money currently in savings exceeds the interest rate you can get on a car loan, then financing the car can still put you ahead. This is true whether you use money from your savings account or the CDs that are maturing.
As far as borrowing from your pension when you retire, the 3.3 percent rate is a good rate, but interest rates on car loans are lower than they have been in recent years. If you have good credit, you may qualify for a similar rate through the automaker’s lending arm or a credit union.
If you do opt to borrow from your pension, make sure you understand any tax implications from doing so as well as what that money is expected to earn in interest if you keep it in your pension fund. It’s likely that it may be better financially to get a car loan elsewhere, even at slightly higher interest rate, and keep your pension fund intact.
Ask the adviser
If you have a car question, email it to us at Driving for Dollars. Read more Driving for Dollars columns and Bankrate auto stories. Follow her on Facebook here or on Twitter @SheDrives.
Bankrate’s content, including the guidance of its advice-and-expert columns and this website, is intended only to assist you with financial decisions. The content is broad in scope and does not consider your personal financial situation. Bankrate recommends that you seek the advice of advisers who are fully aware of your individual circumstances before making any final decisions or implementing any financial strategy. Please remember that your use of this website is governed by Bankrate’s Terms of Use.
Share