Should I finance a used car or pay cash?
There are several factors here. Firstly, there's opportunity cost, i.e. what you would get with the money elsewhere. If you have higher interest opportunities (investing, paying down debt) elsewhere, you could be paying that down instead. There's also domino effects: by reducing your liquid savings to or below the minimum, you can't move any of it into tax advantaged retirement accounts earning higher interest. Then there's the insurance costs. You are required to buy extra insurance to protect your lender. You should factor in the extra insurance you would buy vs the insurance required. Given that you can buy the car yourself, catastrophic insurance may not be necessary, or you may prefer a higher deductible than your lender will allow. If you're not sufficiently capitalized, you may need gap insurance to cover when your car depreciates faster than your loan is paid down. A 30 percent payment should be enough to not need it though. Finally, there's some value in having options. If you have the loan and the cash, you can likely pay it off without penalty. But it will be harder to get the loan if you don't finance it. Maybe you can take out a loan against the car later, but I haven't looked into the fees that might incur.  If it's any help, I'm in the last stretch of a 3 year car loan. At the time paying in cash wasn't an option, and having done it I recognize that it's more complicated than it seems. Unless you are getting better than a 2.95% return on that money market account. Pay cash. That's the purely logical way to make the decision. However if it were me I'd pay cash anyway just because I like the idea of not owing money and having the hassle of dealing with a payment every month. One additional reason to pay with cash rather than financing is that you will be able to completely shut down the dealership from haggling over finance terms and get right to the point of haggling over the cost of the car (which you should always do). I'd pay cash.  Car loans are amortized, so sometimes you can get upside-down on the loan between 18-30 months because you are pre-paying interest. This can get you into trouble if you get into an accident. Given the low rate and the type of car you're buying, you're probably fine either way.
Trade-in values are generally below what you can get in a private sale. To directly answer your question, you should sell the crossover yourself and use the balance to purchase your new vehicle. I would encourage you to use the $9k to finance directly without a lease, especially if you are planning on financing after the lease term. The lease will not save you money over the time you drive the vehicle in this case, and worse, will likely expose you to risk of having to pay additional fees if you break certain terms in the lease (mileage, wear and tear, etc) Best option mathematically is to use the $9k to purchase a vehicle for cash. This provides the lowest total cost of ownership.  Even if you are afraid of purchasing a lemon, leasing a vehicle is awfully expensive insurance against that possibility. You would have to rack up some significant repairs to justify the cost of the lease vs cash over the term of operating the vehicle. I am new to the site and hope I can help! We just purchased a used car a few weeks ago and used dealer's finance again so that's not the issue here. I want to focus on what you can do to resolve your issue and not focus on the mistakes that were made.  1 - DO NOT PURCHASE A NEW CAR! Toyota Camrys are great cars that will last forever. I live in Rochester, NY and all you need is snow tires for the winter as ChrisInEdmonton suggested. This will make a world of difference. Also, when you get a car wash get an under-spray treatment for salt and rust (warm climate cars don't usually come with this treatment).   2 - Focus on paying this loan off. Pay extra to the monthly note, put any bonuses you get to the note. Take lunches to work to save money so you can pay extra. I'm not sure if you put any money down but your monthly note should be around $300? I would try putting $400+ down each month until it is paid off. Anything you can do. But, do not buy a new car until this one is fully paid off!  Let me know if this helps! Thanks! "a link to this article grabbed my Interest as I was browsing the site for something totally unrelated to finance.  Your question is not silly - I'm not a financial expert, but I've been in your situation several times with Carmax Auto Finance (CAF) in particular. A lot of people probably thought you don't understand how financing works - but your Car Loan set up is EXACTLY how CAF Financing works, which I've used several times. Just some background info to anyone else reading this - unlike most other Simple Interest Car Financing, with CAF, they calculate per-diem based on your principal balance, and recalculate it every time you make a payment, regardless of when your actual due date was.  But here's what makes CAF financing particularly fair - when you do make a payment, your per-diem since your last payment accrued X dollars, and that's your interest portion that is subtracted first from your payment (and obviously per-diem goes down faster the more you pay in a payment), and then EVerything else, including Any extra payments you make - goes to Principal. You do not have to specify that the extra payment(S) are principal only. If your payment amount per month is $500 and you give them 11 payments of $500 - the first $500 will have a small portion go to interest accrued since the last payment - depending on the per-diem that was recalculated, and then EVERYTHING ELSE goes to principal and STILL PUSHES YOUR NEXT DUE DATE (I prefer to break up extra payments as precisely the amount due per month, so that my intention is clear - pay the extra as a payment for the next month, and the one after that, etc, and keep pushing my next due date). That last point of pushing your next due date is the key  - not all car financing companies do that. A lot of them will let you pay to principal yes, but you're still due next month. With CAF, you can have your cake, and eat it too. I worked for them in College - I know their financing system in and out, and I've always financed with them for that very reason.  So, back to the question - should you keep the loan alive, albeit for a small amount. My unprofessional answer is yes! Car loans are very powerful in your credit report because they are installment accounts (same as Mortgages, and other accounts that you pay down to 0 and the loan is closed). Credit cards, are revolving accounts, and don't offer as much bang for your money - unless you are savvy in manipulating your card balances - take it up one month, take it down to 0 the next month, etc. I play those games a lot - but I always find mortgage and auto loans make the best impact.  I do exactly what you do myself - I pay off the car down to about $500 (I actually make several small payments each equal to the agreed upon Monthly payment because their system automatically treats that as a payment for the next month due, and the one after that, etc - on top of paying it all to principal as I mentioned).  DO NOT leave a dollar, as another reader mentioned - they have a ""good will"" threshold, I can't remember how much - probably $50, for which they will consider the account paid off, and close it out. So, if your concern is throwing away free money but you still want the account alive, your ""sweet spot"" where you can be sure the loan is not closed, is probably around $100.  BUT....something else important to consider if you decide to go with that strategy of keeping the account alive (which I recommend). In my case, CAF will adjust down your next payment due, if it's less than the principal left. SO, let's say your regular payment is $400 and you only leave a $100, your next payment due is $100 (and it will go up a few cents each month because of the small per-diem), and that is exactly what CAF will report to the credit bureaus as your monthly obligation - which sucks because now your awesome car payment history looks like you've only been paying $100 every month - so, leave something close to one month's payment (yes, the interest accrued will be higher - but I'm not a penny-pincher when the reward is worth it - if you left $400 for 1.5 years at 10% APR - that equates to about $50 interest for that entire time - well worth it in my books. Sorry for rambling a lot, I suck myself into these debates all the time :)" Should I use the money to pay off student loans and future grad expenses for me? Yes.  The main drawback to student loans is that they cannot be gotten rid of except by paying them off (other than extreme circumstances such as death or complete disability).  A mortgage, car loan, or other collateralized loans can be dealt with by selling the underlying collateral.  Credit card loans can be discharged in bankruptcy. Stop borrowing for college, pay for it in cash, then decide what to do with the rest. Make sure you have a comfortable amount saved for emergencies in a completely liquid account (not a retirement account or CDs), and continue to pay off with the rest.  You might also consider putting some away for your kids' college, so  I want to get my older son into a private middle school for 2 years. They have a hardy endowment and may offer us a decent need based scholarship if we look worthy on paper I have a hard time getting behind this plan with a 238K mortgage.  If you want to apply for scholarships that's great - but don't finagle your finances to look like you're poor when you have a quarter-million-dollar house.  If you want to save some for private school then do that out of what you have.  Otherwise either rearrange your priorities so you can afford it or private school might not be in the cards for you. That said- while it was a blessing to be able to pay off the second mortgage and credit cards, your hesitancy to pay off the student loans makes me wonder if you will start living within your means after the loans are paid off.  My concern is that your current spending levels that got you in this much debt in the first place will put you back in debt in the near future, and you won't have another inheritance to help pull you out. I know that wasn't your question, but I felt like I needed to add that to my answer as well. In the UK at least, dealers definitely want you to take finance. They get benefits from the bank (which are not insubstantial) for doing this; these benefits translate directly to increased commission and internal rewards for the individual salesman. It's conceivable that the salesman will be less inclined to put himself out for you in any way by sweetening your deal as much as you'd like, if he's not going to get incentives out of it. Indeed, since he's taking a hit on his commission from you paying in cash, it's in his best interests to perhaps be firmer with you during price negotiation. So, will the salesman be frustrated with you if you choose to pay in cash? Yes, absolutely, though this may manifest in different ways. In some cases the dealer will offer to pay off the finance for you allowing you to pay directly in cash while the dealer still gets the bank referral reward, so that everyone wins. This is a behind-the-scenes secret in the industry which is not made public for obvious reasons (it's arguably verging on fraud). If the salesman likes you and trusts you then you may be able to get such an arrangement. If this does not seem likely to occur, I would not go out of my way to disclose that I am planning to pay with cash. That being said, you'll usually be asked very early on whether you are seeking to pay cash or credit (the salesman wants to know for the reasons outlined above) and there is little use lying about it when you're shortly going to have to come clean anyway. First, who is saying that it is a better option? In general it is best to pay cash for things when you can. I think the reality is that for most people owning a house would be very difficult without some sort of financing. That said, one argument for financing a house these days even if you could afford to pay cash is that the interest rates are very low. For a 30-year fixed loan you can borrow money under 4.5% APR with decent credit. If you are willing to accept even a little risk you could almost certainly invest that same money and get a return higher than 4.5%. With the US mortgage interest tax deduction the numbers are even more favorable for financing.  Those rates look even more attractive when you consider you are paying for the house with today's dollars and paying back the loan with dollars from up to 30 years in the future, which will be worth much less. I think you are making this more complicated that it has to be.  In the end you will end up with a car that you paid X, and is worth Y. Your numbers are a bit hard to follow.  Hopefully I got this right. I am no accountant, this is how I would figure the deal: The payments made are irrelevant.  The downpayment is irrelevant as it is still a reduction in net worth.   Your current car has a asset value of <29,500>.  That should make anyone pause a bit.   In order to get into this new car you will have to finance the shortfall on the current car (29,500), the price of the vehicle (45,300), the immediate depreciation (say 7,000).  In the end you will have a car worth 38K and owe 82K.  So you will have a asset value of <44,000>.  Obviously a much worse situation.  To do this car deal it would cost the person 14,500 of net worth the day the deal was done.  As time marched on, it would be more as the reduction in debt is unlikely to keep up with the depreciation. Additionally the new car purchase screen shows a payment of $609/month if you bought the car with zero down.  Except you don't have zero down, you have -29,500 down.  Making the car payment higher, I estamate 1005/month with 3.5%@84 months.  So rather than having a hit to your cash flow of $567 for 69 more months, you would have a payment of about $1000 for 84 months if you could obtain the interest rate of 3.5%. Those are the two things I would focus on is the reduction in net worth and the cash flow liability.   I understand you are trying to get a feel for things, but there are two things that make this very unrealistic.  The first is financing.  It is unlikely that financing could be obtained with this deal and if it could this would be considered a sub-prime loan.  However, perhaps a relative could finance the deal. Secondly, there is no way even a moderately financially responsible spouse would approve this deal.  That is provided there were not sigificant assets, like a few million. If that is the case why not just write a check? I would like to add that from my own research, a pro to leasing over buying a new vehicle would be that with the lease the entire 7,500 federal incentive is applied directly to the lease, or so they say. If you buy a new car you get a 7,500 federal tax incentive also but if you dont have 7,500 bucks in taxes this wont be as much value. It doesn't sense to me to buy used since you dont get the tax incentive and also if you're in california the 2,500 rebate only applies to buying new or leasing 30 month or longer.