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Smart Buying

Should I Pay Cash for Large Purchases or Finance It?

This is one of the 20 tough financial questions posed in the “Do This or That?” cover story in the September 2011 issue of Kiplinger’s Personal Finance. Use the drop-down menu above to consider other financial conundrums and the right answers for you; share your own experiences and insights in the Discuss field at the bottom of this page.

Pay cash if the item you’re buying depreciates rapidly. That includes nearly everything you’re likely to bring home—including appliances, computers and cars. Why pay interest on something that loses value over time? (Your cash isn’t earning buckets of money in the bank anyway.) Plus, paying cash reduces the risk of buying more than you need. If you don’t have enough cash to buy it brand-new, then buy it used.

Finance it if the purchase is a nec­essity and you don’t have the cash, you qualify for low-cost credit, and you’ll pay back the balance as quickly as possible. You may also want to charge it if you need to build a credit history.

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