The Surprising Reason Retirees Shouldn't Pay Cash for a Car
Yet there is a time and a place for new purchases and loans in your golden years. Financing a car might just be one of them, even if you have the cash to buy one outright. Experts explain why.
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Keep Your Money Working for You
In retirement, you want to be thinking about 'opportunity cost' when it comes to your money, according to Christopher Adam, director at Woodside Credit, which specializes in collector car financing. In other words, keeping your money working for you.
'In a high-rate environment, assets are typically generating more money, which can be very disruptive to long-term wealth if cashed out,' he said.
Thus, pulling cash out of your retirement accounts or high-yield savings might not make sense if you need a new car. 'Financing can minimize the amount of cash being moved around and provide stability in a financial portfolio.'
Of course, ideally retirees will want to look for the best loan terms possible and not leap too quickly.
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Tax Advantages
There are even some tax advantages to financing a car, Adam said. One comes from the auto loan interest deduction provision inside the recently signed One Big Beautiful Bill Act (OBBBA). According to the law, retirees could write off up to $10,000 per year in interest on qualifying vehicles (new vehicles only, cars must be assembled in the U.S. and other stipulations apply). This deduction will only apply from 2025 to 2028 unless further legislation is passed to extend it, however.
Another tax consideration is that withdrawing a sum of money from an account like a 401(k) to pay for a car in full can be counted as taxable income, Adam said, 'potentially causing a push into a higher tax bracket.' Financing a vehicle can get around this issue.
Shop Around
While a loan may be a good idea, it's still important to 'shop around and crunch numbers,' Adam urged.
He even recommended using resources like AI to help understand the full financial impact from different choices. 'It can be time-efficient to run cash-flow projections, evaluate risk and opportunities, making it easier to conclude what strategy makes the most sense,' he said.
The Simpler the Better
While financing may be the right plan, keep loans simple, said Alex Black, the CMO of EpicVIN. Go for short-term loans, like three to five years, with a good down payment (at least 20%) and a fixed rate. 'Do not allow balloon payments or long-time payments.'
Before You Finance
Adam urged any retirees who are thinking of buying a car to be clear about their current income streams and cash flows, and not to finance a car that's out of their budget, either.
'Rule of thumb: If a car payment consumes more than 10% to 15% of monthly income, it's likely not suitable,' he said.
As with all financial decisions in retirement, don't wing it, but talk with your financial planner or advisor, Black urged. 'Go over cash flow, savings goals and future big expenses. A car loan needs to fit easily into your budget without upsetting the big picture.'
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This article originally appeared on GOBankingRates.com: The Surprising Reason Retirees Shouldn't Pay Cash for a Car
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Indian Prime Minister Narendra Modi has been performing a tricky balancing act – maintaining close partnerships with US President Donald Trump and Russia's leader Vladimir Putin while insisting his country is a neutral party in the Russia-Ukraine war, to the dismay of Western nations who have sanctioned Moscow. But now, it seems, Trump has lost his patience – demanding that Modi finally pick a side, and using India's continued purchases of cheap Russian oil as leverage in his trade war. The conundrum pits Trump and Modi, two nationalist leaders who have often described their friendship in warm terms, increasingly against each other. On Monday, Trump vowed in an interview with CNBC to 'substantially' raise tariffs on India 'over the next 24 hours' because it's still buying Russian oil. It's not clear what the new tariff rate would be – or why he is now taking issue with something India has done for years. 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India has long been reliant on Russia for crude oil to support its booming economy and growing population, now at more than 1.4 billion people. The world's most populous nation is already the third biggest consumer of oil globally, and with India's consumption rate still growing rapidly, it is expected to surpass China by 2030, according to Reuters. India's transformation into an economic superpower has uplifted millions of households – which in turn have bought more cars and motorcycles, driving up the demand for gasoline. Russian crude oil accounts for 36% of India's overall imports, making Moscow the country's top supplier, according to Muyu Xu, a senior oil analyst at trade intelligence firm Kpler, who cited figures for the first six months of this year. After Russia invaded Ukraine in 2022, European nations largely stopped buying Russian oil. It now flows primarily into Asia – with China, India and Turkey among Russia's big clients and is a vital revenue stream for Moscow. 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Its choices have also been limited by other US actions – India was forced to stop buying oil from Iran and Venezuela after Trump imposed sanctions and threatened tariffs against countries that bought from those places. Before it halted its purchases, India had been one of Iran's biggest clients, buying up to 480,000 barrels per day, according to Reuters. 'We have our hands tied at the back,' said Singh. 'There is very limited space in which the Indian oil economy or market can operate.' For now, he added, it's unlikely Delhi will bow to Trump's demands. Modi's administration will continue navigating trade talks with the US and explore the 'traditional route' of Middle Eastern oil while it works to wean itself off Russian crude – but this it 'cannot do overnight,' said Singh. Russia's oil also feeds India's economy, which plays a key role in the global oil trade. 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Trump has lashed out too, increasingly frustrated at his inability to end the Ukraine-Russia war – something he'd promised to do on his first day in office. 'I don't care what India does with Russia,' Trump wrote in an irate post on Truth Social last week. 'They can take their dead economies down together, for all I care.'
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CNN
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India has long been reliant on Russia for crude oil to support its booming economy and growing population, now at more than 1.4 billion people. The world's most populous nation is already the third biggest consumer of oil globally, and with India's consumption rate still growing rapidly, it is expected to surpass China by 2030, according to Reuters. India's transformation into an economic superpower has uplifted millions of households – which in turn have bought more cars and motorcycles, driving up the demand for gasoline. Russian crude oil accounts for 36% of India's overall imports, making Moscow the country's top supplier, according to Muyu Xu, a senior oil analyst at trade intelligence firm Kpler, who cited figures for the first six months of this year. After Russia invaded Ukraine in 2022, European nations largely stopped buying Russian oil. It now flows primarily into Asia – with China, India and Turkey among Russia's big clients and is a vital revenue stream for Moscow. Delhi is buying Russian oil at a heavy discount, 'which otherwise would not have been given by the traditional oil and gas suppliers,' said Amitabh Singh, associate professor at Jawaharlal Nehru University's (JNU) Centre for Russian and Central Asian Studies. He added that India's continuing purchases were 'a purely economic or commercial decision' – something Indian authorities have also argued, but which has been met with derision and anger from Ukraine and its supporters. While India has diversified its oil sources over the years, cutting out Russian oil entirely would leave a gaping hole that's hard to replace. India imports 80% of its oil needs, and its domestic oil production isn't enough to make up the difference. OPEC, the coalition of the world's top oil producers, may have 'some spare capacity, but it's difficult to ask them to pump 3.4 million barrels overnight,' said Xu when she spoke to CNN in July, referring to Russia's daily seaborne exports. Its choices have also been limited by other US actions – India was forced to stop buying oil from Iran and Venezuela after Trump imposed sanctions and threatened tariffs against countries that bought from those places. Before it halted its purchases, India had been one of Iran's biggest clients, buying up to 480,000 barrels per day, according to Reuters. 'We have our hands tied at the back,' said Singh. 'There is very limited space in which the Indian oil economy or market can operate.' For now, he added, it's unlikely Delhi will bow to Trump's demands. Modi's administration will continue navigating trade talks with the US and explore the 'traditional route' of Middle Eastern oil while it works to wean itself off Russian crude – but this it 'cannot do overnight,' said Singh. Russia's oil also feeds India's economy, which plays a key role in the global oil trade. India argues that its purchases from Russia have kept global oil prices lower, as it's not competing with Western nations for Middle Eastern oil. When the Ukraine-Russia war kicked off during the Biden administration, 'everyone knew that India is buying oil from Russia,' said Singh – but added that Western nations had tolerated it 'because they knew that if India is not buying oil from Russia, then inflation will go up.' If India switches to importing oil from somewhere else at a higher cost, American consumers will likely feel the hit, too. Some of the Russian crude oil sent to India is then refined and exported back out to other countries – because sanctions on Moscow don't include products refined outside Russia. It's a loophole that has benefited both India's economy and other recipient nations. In 2023, India exported $86.28 billion in refined oil products, making it the world's second-biggest exporter of petroleum products, according to the National Bureau of Asian Research (NBR). Some of the biggest buyers of these refined products, made from Russian crude oil, include Europe, the US, and the UK, according to the Centre for Research on Energy and Clean Air (CREA). The independent organization has urged G7 nations to close this loophole, arguing it would disincentivize third countries – like India – to import Russian crude. India and Russia's partnership goes beyond just oil and stretches back decades – another reason it's not so easy to dismantle. India was officially nonaligned during the Cold War between the US and the USSR. However, India began to lean towards the Soviet Union in the 1970s when the US began providing military and financial assistance to India's neighbor and longtime rival Pakistan. This was when Russia started providing arms to India. In recent years, India has drawn closer to Washington, and ramped up arms purchases from America and its allies, including France and Israel. Still, India remains the top recipient of Russian arms, according to SIPRI. And Modi remains friendly with Putin – even paying a controversial visit to Moscow last year, with the Russian president greeting his counterpart with a hug and personally driving him around. Trump and Modi, too, have previously hailed their friendship, with Trump declaring at a 2019 rally that India had 'never had a better friend as President than President Donald Trump.' Singh, the professor, said it was expected the friendship 'would continue' when Trump arrived at the White House for his second term. But things have soured this time around; India isn't happy with Trump claiming credit for a ceasefire in the latest India-Pakistan conflict, or with his accusations that their oil purchases are helping 'prop up a Russian war machine,' he said. Trump has lashed out too, increasingly frustrated at his inability to end the Ukraine-Russia war – something he'd promised to do on his first day in office. 'I don't care what India does with Russia,' Trump wrote in an irate post on Truth Social last week. 'They can take their dead economies down together, for all I care.'
