Car loan question
- Thread starter cmjh10
- Start date
The people in the best position to offer financial advice are the people who are successful financially. And people who are successful financially minimize the amount of things they finance. If possible, it is always better to pay for something up front than to finance it. Financing something means paying more for it than is needed, which is not a smart financial move.
Nothing like being judgmental of others and layering ignorance on top - great combination!
I bought a new vehicle in 2013 - I could have quite easily payed cash for it, but with the 1.75% interest rate (over 60 months) I was able to get, I could make significantly more money from investing that cash instead of paying for the car up-front.
So, I've had about a 9% return on that cash so far, while only paying 1.75% on the loan. I am paying off the car over 60 months and am definitely able to "afford the car!"
No need to act like a sanctimonious ******! The OP was asking for help/advice, not a lecture!
Unless you can make more investing the money you would use to pay for a car in full. The money you pay in interest on a cheap car loan is probably less than you can make investing that money.
I don't like having loans and owing money. I never wanted to owe (long term basis) on anything other than a mortgage (which is 3 1/8% with a "refigure" coming later this summer when our 5-yr ARM comes due. Our two previous vehicle purchases were fleet vehicles at least a year old both times and paid for almost immediately. But early this year we traded in our 13-year old minivan on a "new vehicle" purchase for a 0% loan over five years. Made me cringe to do it, but hey, this allows me to keep more money earning interest (almost anything is higher than 0%) and I pay ahead on both my mortgage and vehicle loan. I'd still rather owe nothing, but I'm getting there.
The problem with that theory is how many people actually invest the money? Instead, people just make payments on something that they don't need to make payments on and end up paying more for it than is necessary.
To each his/her own. I'd rather not have debt/payments on something. Its nice actually having the money we make each paycheck be available instead of already spoken for. Then again, I also don't see the need to buy a new car every 3-5 years like most people. And I don't see the need for buying a brand new car every time you get a new one either.
In theory borrowing at a low interest rate and investing at a higher interest rate makes sense, but like others have said it usually doesn't get invested. Heck companies don't always invest the money and that is their job. There also is something to having no or minimal debt. No one way is right.
There's a difference between electing to pay a car over 60 months and NEEDING 60 months to be able to pay it off.
this is how I see it... and will be able to do this on my next car. However, I still am gonna drive this 2006 Chrysler T/C, till it falls apart. My car ego is very low.
I get 0% on a car note I'm not cringing. I'm laughing as I walk out the door!
I've only had one car note in my life. I'm not a fan and I've been blessed that I haven't 'had' to buy a new ride very often, but 0% is time to pop the champaign!
I had to buy a car last time. The State of California made me take the old dirty Pathfinder off the road.....sons a *******
I look at this completely different. I paid off a car about 10 years ago and at that time started saving for my next car so that I wouldn't have a car loan.
#1 I can invest this money in anything I like. In my case I put it in company stock where I get a 15% discount.
#2 It can also be looked at as an emergency fund
#3 Sometimes you get a discount for taking out a loan. I think Dodge gave me $3,000 only if I got a loan from them. I took the loan and paid it off within 2 months.
#4 If I save too much it's not going to hurt anything. If I don't have enough saved than I just save longer until I have the amount I need to buy a "new to me" car.
#1 I can invest this money in anything I like. In my case I put it in company stock where I get a 15% discount.
#2 It can also be looked at as an emergency fund
#3 Sometimes you get a discount for taking out a loan. I think Dodge gave me $3,000 only if I got a loan from them. I took the loan and paid it off within 2 months.
#4 If I save too much it's not going to hurt anything. If I don't have enough saved than I just save longer until I have the amount I need to buy a "new to me" car.
I'm in need of a new car and really want to get a 2014 or newer truck, but gosh dammit if I'm not a cheap *** tightwad that thinks that money would be spent better playing blackjack in Vegas.
This.
Mr Money Mustache would be a great example. Retired by the time he was 30. Yes 30. His take on car loans:
Rule #1: You NEVER, EVER borrow money to buy a car.
Ouch, that might **** some people off, since something like 73 percent of new cars in the US are financed. But if you look at that 73 percent of buyers, you’ll see that they are usually underwater on a lot of loans, quite nervous about losing their jobs, and have a net worth of close to zero. And if you look at the average self-made millionaire, you’ll find they do not buy new cars at all and they never buy on credit.
http://www.mrmoneymustache.com/2011/05/02/car-strategies-to-cut-your-costs-in-four-or-more/
So many good points in this article (1-6).
This rent vs. buy article is also interesting
http://www.mrmoneymustache.com/2015/07/27/rent-vs-buy/
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This is just wrong. Objectively. It can be a smart financial move to borrow money. Debt aversion is not always a good thing.
When someone says "always" or "never", they are almost always wrong. In some cases, it can be better to finance something rather than pay 100% cash up front. A car payment can be one of those things if you are smart enough with your money and you get a good rate.
