# Need a new car while on the market for a house. Cash or loan purchase? **URL:** \ **Category:** In My Humble Opinion\ **Created:** [October 12, 2024, 10:30pm UTC](https://boards.straightdope.com/t/need-a-new-car-while-on-the-market-for-a-house-cash-or-loan-purchase/1008701 "2024-10-12T22:30:36Z")\ **Posts on this page:** 10\ **Page:** 1
**Author:** ![Eonwe](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/eonwe/32/240_2.png) [@Eonwe](https://boards.straightdope.com/u/Eonwe)\ **Post date:** [October 12, 2024, 10:30pm UTC](https://boards.straightdope.com/t/need-a-new-car-while-on-the-market-for-a-house-cash-or-loan-purchase/1008701/1 "2024-10-12T22:30:36Z")
(I will certainly talk to a financial professional also… just trying to get an understanding here). Last week my car broke down and is likely un-repairable. So, I’m in the market for a new (to me) vehicle. Probably in the $18-25k range. We have have enough in savings that we could buy a car in that range without a loan. We also are in the market for a new home, and the money for a new car would come out of the same savings we’ll be making some future down payment on. I’m wondering what makes more sense financially. If we pay in cash our house down payment is smaller, but our debt load stays the same. If we take a loan for a car, our house down payment doesn’t change much, but we take on debt. I assume our purchase price approval from the credit union will be impacted by both, but will it be impacted in the same way regardless of the choice? ---
**Author:** ![filmore](https://avatars.discourse-cdn.com/v4/letter/f/7993a0/32.png) [@filmore](https://boards.straightdope.com/u/filmore)\ **Post date:** [October 12, 2024, 11:07pm UTC](https://boards.straightdope.com/t/need-a-new-car-while-on-the-market-for-a-house-cash-or-loan-purchase/1008701/2 "2024-10-12T23:07:37Z")
If you pay for the car in cash up front, you’d save on the interest you’d lose on a car loan. Of course, that means your savings would go down from buying the car. However, if you later find that you need that cash back in your savings for your house purchase, you should be able to get a loan on your car from your bank. It’s not much different than getting a car loan. The bank is essentially giving you a used car loan on your own car. Check with your bank first to be sure. That would allow you to get some of the car’s value back as cash if you need more cash on hand. ---
**Author:** ![Dewey\_Finn](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dewey_finn/32/4222_2.png) [@Dewey\_Finn](https://boards.straightdope.com/u/Dewey_Finn)\ **Post date:** [October 12, 2024, 11:09pm UTC](https://boards.straightdope.com/t/need-a-new-car-while-on-the-market-for-a-house-cash-or-loan-purchase/1008701/3 "2024-10-12T23:09:55Z")
> [@filmore](#): > > If you pay for the car in cash up front, you’d save on the interest you’d lose on a car loan. On the other hand, if you get a car loan, the amount of the payments will affect how much you can afford in mortgage payments. ---
**Author:** ![Bullitt](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/bullitt/32/5725_2.png) [@Bullitt](https://boards.straightdope.com/u/Bullitt)\ **Post date:** [October 13, 2024, 1:43am UTC](https://boards.straightdope.com/t/need-a-new-car-while-on-the-market-for-a-house-cash-or-loan-purchase/1008701/4 "2024-10-13T01:43:07Z")
If the seller offers 0% interest then it makes sense to finance it while leaving your money in an interest earning fund. ---
**Author:** ![BobLibDem](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/boblibdem/32/3149_2.png) [@BobLibDem](https://boards.straightdope.com/u/BobLibDem)\ **Post date:** [October 13, 2024, 2:23am UTC](https://boards.straightdope.com/t/need-a-new-car-while-on-the-market-for-a-house-cash-or-loan-purchase/1008701/5 "2024-10-13T02:23:42Z")
I think you also need to think about your credit rating. Applying for a car loan as well as having this new balance may lower your credit score and result in a higher mortgage rate. ---
**Author:** ![Twoflower](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/twoflower/32/22_2.png) [@Twoflower](https://boards.straightdope.com/u/Twoflower)\ **Post date:** [October 13, 2024, 2:46am UTC](https://boards.straightdope.com/t/need-a-new-car-while-on-the-market-for-a-house-cash-or-loan-purchase/1008701/6 "2024-10-13T02:46:16Z")
Do you have enough savings to make a down payment on the house of at least 20%? And, if you buy a car out of the savings, will that still be true? If both are true, buy the car with cash. The extra mortgage amount will basically be equivalent to a low-interest, tax favored car loan. If buying the car with cash makes the difference in the home loan requiring PMI, then don’t do it. ---
**Author:** ![MikeG](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/mikeg/32/4329_2.png) [@MikeG](https://boards.straightdope.com/u/MikeG)\ **Post date:** [October 13, 2024, 4:21am UTC](https://boards.straightdope.com/t/need-a-new-car-while-on-the-market-for-a-house-cash-or-loan-purchase/1008701/7 "2024-10-13T04:21:29Z")
Assuming a sedan: Here’s a thought. Buy a 12k Toyota Avalon, the newest you can find. My 2004 has 193k on it, I have done almost nothing to it and I’d take it to the opposite side of the US and only worry about where to eat. Looks good drives like a Lexus and is damn near bulletproof. If you need to haul stuff sub in a Highlander for 15-17k. ---
**Author:** ![puzzlegal](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/puzzlegal/32/3827_2.png) [@puzzlegal](https://boards.straightdope.com/u/puzzlegal)\ **Post date:** [October 13, 2024, 11:25am UTC](https://boards.straightdope.com/t/need-a-new-car-while-on-the-market-for-a-house-cash-or-loan-purchase/1008701/8 "2024-10-13T11:25:08Z")
> [@Twoflower](#): > > Do you have enough savings to make a down payment on the house of at least 20%? And, if you buy a car out of the savings, will that still be true? > > If both are true, buy the car with cash. The extra mortgage amount will basically be equivalent to a low-interest, tax favored car loan. If buying the car with cash makes the difference in the home loan requiring PMI, then don’t do it. This was my initial thought, too, but it’s possible that the impact on your credit score from talking out an auto loan would impact your interest rate enough to matter. But… You can refinance the home in the future if interest rates go down, and if that happens, your credit score will likely have recovered from the new hard inquiry re the car. ---
**Author:** ![Musicat](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/musicat/32/20189_2.png) [@Musicat](https://boards.straightdope.com/u/Musicat)\ **Post date:** [October 13, 2024, 12:17pm UTC](https://boards.straightdope.com/t/need-a-new-car-while-on-the-market-for-a-house-cash-or-loan-purchase/1008701/9 "2024-10-13T12:17:09Z")
With regard to the effect upon a credit rating…does your bank have a program (usually free, online) that allows you to test various scenarios to see what that would do to your credit score? I have access to at least two of those (and they don’t always agree in an outcome). I can see what taking out a new loan plus other factors would do. For example, if I took out a $20K car loan only, my credit rating would probably go UP, since right now, they say I don’t have enough loans in my credit mix. Strange, but that’s the twisted world of finance. ---
**Author:** ![Eonwe](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/eonwe/32/240_2.png) [@Eonwe](https://boards.straightdope.com/u/Eonwe)\ **Post date:** [October 18, 2024, 2:00pm UTC](https://boards.straightdope.com/t/need-a-new-car-while-on-the-market-for-a-house-cash-or-loan-purchase/1008701/10 "2024-10-18T14:00:39Z")
Thanks for the advice, all! I hadn’t even considered credit score impact. I’ll do a little more research, but it’s looking like no loan is the way to go at the moment.