Originally posted by geoff:
question: why would anyone pay cash for a depreciating asset like a car? makes no sense.
I agree for businesses. A business should never buy a car.
A family is different I think. Purchasing a car for cash is the absolute cheapest way to get a car if you plan to have the car a significant amount of time. You don't have to pay interest on the vehicle. If you get a new car every 3 years anyway, it may be cheaper to lease. But this is not always so - if your vehicle holds its value well, it is possible to get equity in a purchased vehicle in 3 years.
In the example above, you would have to pay $18,000 ($500 X 36 mo) to lease the vehicle for 3 years.
To purchase the vehicle (if you could get $22k after 3 years) it would cost you $12,000 (34,000-22,000).
You save $6,000 if you buy. Of course if you got a loan for the $34K, you have to subtract the interest paid for 3 years from the $6k.
I may have done some creative math with this. Someone correct me if I'm wrong here. I'm a computer guy - not an accountant.