Should You Finance or Pay Cash for a Corvette (or Any Car)?

Corvette buyers who pay cash like to brag about it but those who finance might win in the end.

While the C8 Chevrolet Corvette is arguably one of the best performance cars for the money in today’s market, it is still one of the more expensive American cars. Many people who buy a car that costs more than $50,000 will make payments, but with the Corvette appealing to a crowd that is likely to have a little more disposable income than the average driver. As a result, quite a few C8 owners paid cash rather than financing and in most cases, the people paying cash dislike the idea of making payments.

This thread in the Off-Topic section didn’t start off as a discussion of paying cash versus financing, but that is what it evolved into. Those who pay cash point out that they don’t have any debt on a depreciating asset. Those who finance point out that making payments allows them to take the money that they would have used to buy the car with cash and instead invest it, so in the long run, the investments can pay for the car.

C8 Corvette Financing Information

This discussion on paying cash versus financing was started by a member named “C7CorvetteCrazy” who shared a 17-minute YouTube video. Several people called out the OP for his video being clickbait and frankly, we are inclined to agree. The information didn’t need to be spread out across a 17-minute video and with just two posts, the OP is seemingly trying to get more traffic for his YouTube channel.

“DRM87” was among the members who didn’t want to have to sit through a 17-minute video for basic financing information, so he shared the numbers in the thread.

In case anyone doesn’t want to watch the video. Here was his financial information:
Vehicle Price: $79,915
Taxes: $4,085
Loan term: 84 months
Interest: 3.7%
Down Payment: $4,100
Monthly Payment: $1,076

While the video didn’t provide much useful information, the thread quickly evolved into a dispute on whether it is better to pay cash or finance.

The Cash Crowd

The first person to reply was “RHHalford”, who was also the first person to support paying cash up front.

Payments ??? Just taking the $$ out of the bank.

The next was “VetteMan41960”, who believes that the majority of C8 Corvette buyers are paying cash.

I think you may find your in a minority here. The Corvette is a toy for most of us and I would bet the majority of C8 buyer just pay cash for their toys.

The C8 is not a need to have buy its a want to have toy for most. Plus the age and demographic of most Corvette buyer translates to cash buyers

“C5Vette73” refuted that suggesting, insisting that most C8 buyers will be financing.

Most of those buying a C8 finance the purchase.

Financing makes the world go round.

You’d be foolish to tie up your cash in a depreciating asset when money only costs about 2.5%, assuming you have good credit.

“Joe Stingray” is also paying cash, but he understands that some will be financing.

I’m with you…..that’s what I did with my last 2….and what I will do with this one as well.

Finance and Invest

If you have the cash laying around and you don’t want to go into debt on a new Corvette, paying cash is the easy choice. However, those who want to get the most for their money are quick to point out that interest rates on borrowed money are fairly low right now. Rather than spend their $50,000 all at once, these folks believe that it is smarter to borrow money at a low rate and make payments while taking a larger sum of money and investing it in a way that will yield a higher interest rate.

“Supersonic427” was the first to point out the advantages of financing a C8 Corvette.

Thanks for the openness and honesty about your monthly payment. There are many who feel if you can’t pay cash for a Corvette that you shouldn’t buy one! I am not one of them! Mine will financed also, as all my other ones were too! Your percentage rate at 3.7%@84 months was a good one! It shows that your credit score was excellent. I secured a loan at 2.29% for 72 months. Most banks at 84 months are around 5% even with excellent credit including the credit union I went with. Enjoy the car …It is beautiful!

He would later go on to add this.

My 2020 will be my 40TH Corvette since I was 18 years old. I financed the first one then and will be financing #40 too! If it was cash only to purchase a Corvette…It would have been 1 used one that I would have had!

“C82LT” was the first to point out the investment angle.

If your interest rate will be below 3%, generally speaking, you’re better off making the payments and keeping money working for you earning higher rates. Even low risk investments can easily earn 6% or more. If you pay cash, you took your money out of the game. A future dollar is always worth less than a current dollar.

“JCP911S” didn’t focus so much on buying the car as he provided a basic lesson in ecomonics.

Money is a tool…. do you use a belt sander to clean your teeth? Do you use a framing nailer to hang a picture?

Simple math…. Cost Of Money…. If I can make 3.8% in an investment, and borrow money at 2.8%, then I am a bank, making a spread. of 1%…. simple.

However it gets more complicated, because Cash (“Liquidity”) has “opportunity cost”

For example, if you put $70K of dead money into a car, and are carrying $9K on your CC, it will cost you 10-15%… like a payday loan. Ahhh, borrow at $3% and pay off the 15%… Stupid.

Also, tax impacts….. If your money is in a 401K… and pull out $70K to buy a Corvette cash, You could will pay 30% marginal tax rate on that money, so the car will actually cost $21K in tax.

If you finance it for $1,100/mo, and only pull $13,200 out in a given tax year…. and keep your marginal tax rate at 20%, then the car will cost $13.5K in tax spread over 5 years…. a substantial saving.

It all depends on your personal situation, but worth considering.

Along with the points discussed here, there are several members in this thread point out the best way to borrow and invest. Some members list what bank they used and what kind of interest rates they received while others share tips on how to invest with the best chances of a solid return. For a closer look at that information, or to provide your own input, click here to head into the thread.

Images courtesy of GM Media

.