I f you can't pay for it, don't buy it! Period.

If only our old clunkers could run forever!  I couldn't imagine being able to save in full for a new car.  Life is unpredictable any my salary not that great.  So, I finance at the best rate I can, buying a dependable and sensible car -- then I drive it for at least ten years, with regular preventive maintenance.

While some folks relish a new car -- I stress about it.  If there is one purchase I wish I didn't have to make, that would be it.  Thankfully a new car comes along about every twelve years for me...

My last car broke down for the final time while my hubby was driving it through an unsavory section of town.  A prostitute thought he was slowing down for her.... luckily, it started one last time and got him far enough away from her!

I favor the drive it until it drops method.  I live alone and I own my own house; the last thing I need is something with payments on it.  When my old car was wearing out, my friends from church sold me another older car.  It didn't have too many miles on it and it still runs great.  If I bought a new car, it wouldn't have the good features my older semi-luxury car has.

Contrarian view:  you left out two issues: Risk and Taxes.  No can guarantee 8% (just look at the last few months) and 8% return after taxes looks closer to 5-6%.   I wouldn't risk $30-40K for a 1% return.  Save up the money and buy a used car.

For the naysayers out there saying that you have to be rich to be able to buy a car outright or some such you couldn't be further from the truth.. I'll explain.

If you have a working car and any amount of disposable income then your all set. Simply take a portion of that disposable income and put it away towards the purchase of your next vehicle. Remember that you should always have 3-6 months of living expenses tucked away in case of emergency. If your current car takes a dump and you haven't saved enough for a replacement (notice I didn't say new) car then it may be time to dip into that emergency fund. If you haven't built up that emergency fund yet then it limits your purchase options. My first car cost $9k and lasted 7 years before I traded it in. When I sold it it was only worth $2k and still ran fine. It's not hard to find a car for under $5k thats reliable and won't put you into debt. While your driving that around you start saving up for your next car and rinse and repeat. The longer you go with the same car the more options you have when you do finally replace it because you'll have saved up more money.

My  1995 BMW 328I has over 210000 miles, the other one 528 has 150000, yet the

next one has over 120000.  Two of them are paid off and I have great joy in

driving them because there is no payment, and less insurance.  All of them take

some money for repairs, but over all, keeping them fixing until they stop running is

the wise financial decision.  Trading in cars every three to four years is the worst

financial game and the money lost is too much to calculate.  Most of the people

are too much concerned with what other people think of our cars, but always

remember that we drive and pay for our cars; not the neighbour or strangers.

When I graduated College in 2004, I bought a 2001 Audi A4 Quattro.  I put $10k down and financed about $12k, and got 0.9% APR financing to boot.  I know owe only few payments left, and my car has 64k miles.  I plan to drive it for a good 5 more years, while putting money away, so that I can put at least $10k-$15k down when I buy my next car.  

In the meantime I get to drive a nice car.

I feel that everyone has the right to do what they need to do, and getting a low-interest car loan is not something other people need to humiliate them about.  We all have to make our own decisions based upon what is good for us ---- not what someone else thinks.  The average person does NOT have cash to pay in full.  Let us alone!!  We are doing the best we can, and do not consider having a modest car payment makes us "drowning in debt".  If someone can pay cash for a car, fine.  If someone can't, that's fine, too.  Grow up everybody!

Don't buy a brand new car.  Bad investment.  Buy something a few years old, in great shape.  Car fax it before you buy.  Look for low miles, one owner and of course, no accidents. (You can open a thirty day unlimited car fax account for car shopping) And never buy anything that's been rebuilt.  If you have to finance, shop for the lowest percentage.  That's usually not at the dealership.

Ok, so what if you owe $5K on a car that is now worth only $2K b/c the transmission is dying? Do you rebuilt the transmission or buy another used car, incurring more debt?