This was something I was pondering last night. I just interviewed for a new job which I think I'll accept if offered - but I'd have to buy a car as it's about 20 minutes from where I live and isn't bus-able. I'm thinking I can easily afford something in the $5-7k range, plus insurance costs.. and it occurs to me that I've got a bounty of credit card checks, I wonder if I should just write myself a balance transfer check and pay "cash" for the car?
This seems good to me for three reasons. One, I can get a very competitive interest rate (Chase doesn't have the fixed 3.99% right now, but I can get 5.99% anytime and they'll deposit the money into my bank account) or perhaps even 0% interest (I still have 0% checks for MBNA, I'll call them up and see if they'd raise my credit line $7,000.) I know if I do the 0% option I'll have to switch it in a year, but I'd have saved a whole lot of money. The second reason it seems good is that the credit card debt is unsecured - ie so if something bad happens and I can't pay the cards, my car won't be repossessed because the two aren't connected. Third, if bad things happen, credit cards have somewhat lower minimum payments than the regular four-year personal loan payment on a car loan, especially at 0% - and I imagine it'll be easier to work things out with the credit card company than a lender.
I'll have to see what I can do with my cards - I can still get a 7% rate from the credit union which isn't too bad.