fascinating that people didn't used to finance cars
02-18-18, 07:12 AM
#16
Lexus Test Driver
Originally Posted by Aron9000
Marshall, you need to realize that a lot of the people on this board are so damn wealthy(and old) that losing their job tomorrow wouldn't be that big of a deal, they have so much damn money invested they could pay off all their debts without it really affecting their overall net worth. Now if they have 3 kids, $20,000 a year for private school tuition, planning to send them to Yale with MBA's for a cool half million each, yeah maybe that's a different story for those folks.
With interest rates being so damn low, it makes more sense to have a mortgage and/or a car payment and invest that money for the long term. You need to think about having $500,000 or $1,000,000 cash tied up into buying your house outright or if its better to have a stupid cheap APR on your mortgage and then invest that $1,000,000 at a higher rate of return.
Marshall, what you are saying makes perfect sense when interest rates are sky high, if you have the cash, buy your car or house if a loan is something stupid like 8% or 10%
With interest rates being so damn low, it makes more sense to have a mortgage and/or a car payment and invest that money for the long term. You need to think about having $500,000 or $1,000,000 cash tied up into buying your house outright or if its better to have a stupid cheap APR on your mortgage and then invest that $1,000,000 at a higher rate of return.
Marshall, what you are saying makes perfect sense when interest rates are sky high, if you have the cash, buy your car or house if a loan is something stupid like 8% or 10%
02-18-18, 10:18 AM
#17
Lexus Fanatic
Marshall, you need to realize that a lot of the people on this board are so damn wealthy(and old) that losing their job tomorrow wouldn't be that big of a deal, they have so much damn money invested they could pay off all their debts without it really affecting their overall net worth. Now if they have 3 kids, $20,000 a year for private school tuition, planning to send them to Yale with MBA's for a cool half million each, yeah maybe that's a different story for those folks.
With interest rates being so damn low, it makes more sense to have a mortgage and/or a car payment and invest that money for the long term. You need to think about having $500,000 or $1,000,000 cash tied up into buying your house outright or if its better to have a stupid cheap APR on your mortgage and then invest that $1,000,000 at a higher rate of return.
Marshall, what you are saying makes perfect sense when interest rates are sky high, if you have the cash, buy your car or house if a loan is something stupid like 8% or 10%
With interest rates being so damn low, it makes more sense to have a mortgage and/or a car payment and invest that money for the long term. You need to think about having $500,000 or $1,000,000 cash tied up into buying your house outright or if its better to have a stupid cheap APR on your mortgage and then invest that $1,000,000 at a higher rate of return.
Marshall, what you are saying makes perfect sense when interest rates are sky high, if you have the cash, buy your car or house if a loan is something stupid like 8% or 10%
We can just agree to disagree on that...and I respect your opinion.
In my book, no-debt beats debt almost every time. True, one can invest the money they would have used to pay off the vehicle. But, in this recent volatile stock market and its daily wild roller-coaster swings, and the unacceptably-low interest rates on almost all fixed-income investments except for some tax-free municipal bonds, investing really doesn't get one very far.
02-18-18, 11:30 AM
#18
Lexus Champion
We can just agree to disagree on that...and I respect your opinion. In my book, no-debt beats debt almost every time. True, one can invest the money they would have used to pay off the vehicle. But, in this recent volatile stock market and its daily wild roller-coaster swings, and the unacceptably-low interest rates on almost all fixed-income investments except for some tax-free municipal bonds, investing really doesn't get one very far.
In my book, no-debt beats debt almost every time. True, one can invest the money they would have used to pay off the vehicle. But, in this recent volatile stock market and its daily wild roller-coaster swings, and the unacceptably-low interest rates on almost all fixed-income investments except for some tax-free municipal bonds, investing really doesn't get one very far.
02-18-18, 12:30 PM
#20
Lexus Champion
There are a number of factors that have made this happen:
- Many people's wages have not kept up with the rise in prices of needed consumer items, including automobiles. People who in the past were able to pay cash for a car now cannot afford to do so, and are forced to borrow or lease to pay for their cars.
- Credit has been very cheap -- almost free -- in the past decade. This has lowered the monthly rates.
- Banks have increased the loan terms, from an average of 3 to 4 years to averages of 6, 7 and 8 years; this allows for lower monthly rates. And with semi-monthly or even weekly repayment schedules, the rate becomes very low.
02-18-18, 01:42 PM
#21
rich people borrow money all the time. they get rich by using other people's money.
If you can borrow at 0%, and you have the means to pay it off on day 1, it's still better to borrow and keep your cash for other investments which give you a better return.
If you can borrow at 0%, and you have the means to pay it off on day 1, it's still better to borrow and keep your cash for other investments which give you a better return.
02-18-18, 01:50 PM
#22
Pole Position
Don't hate me for this but if you do not have equity worth of what you are purchasing then you are hitting a risk even with 0% financing. I just live by that rule cause it makes my life simple, if I can't cash it out I won't buy it. No wonder I live in a condo and not a house Thank God salary does not constitute my only income, it actually helps me save cause I only use the salary to live through the month in comfort. Just a thought that I have to slice up my salary as sole income for trivial things in real life like premium badged vehicles, fancy cell phones, pricey suits, jewelry, etc is very scary. I see all the time folks who are 20 years older than me trying to find a way to finance or lease for new BMW even after they refinanced two times their old BMW and still failed.
Now if you have a corp or business then it's reasonable to finance cause there is not a lot you can loose. I mean there is but you have at least one more layer of protection.
Thank God salary does not constitute my only income, it actually helps me save cause I only use the salary to live through the month in comfort. Just a thought that I have to slice up my salary as sole income for trivial things in real life like premium badged vehicles, fancy cell phones, pricey suits, jewelry, etc is very scary. I see all the time folks who are 20 years older than me trying to find a way to finance or lease for new BMW even after they refinanced two times their old BMW and still failed.Now if you have a corp or business then it's reasonable to finance cause there is not a lot you can loose. I mean there is but you have at least one more layer of protection.
02-18-18, 02:35 PM
#23
Lexus Fanatic
Yes, you can make money with stocks if the market is timed right, but it is risky at best...and you pay capital gains tax to the IRS and state.
The best way to finance a car, of course, if possible, is to get a 0% loan...we sometimes see that with automakers with strong incentives to sell certain vehicles. Then, with essentially free money (even more so, counting for inflation), yes, any interest you earn on an investment will profit will help you pay off the loan.
02-18-18, 03:56 PM
#24
Forum Administrator
iTrader: (2)
mm, while I generally subscribe to the buy a car outright approach myself , nearly the entire investing professional community will tell you that you are dead wrong in the above in the long run and has the statistics and math to prove it
02-18-18, 04:31 PM
#25
Lexus Champion
out of my pocket for whole sale value. From then on I pay in full when I get new ones as well as wife's. Same with other things. Think paying off mortgage asap was a
good idea.
02-18-18, 06:01 PM
#26
Lexus Fanatic
Totally agreed.....even more so with a mortgage. Once the house-note is clear, paid off, and the deed is in your name, that's probably more important than even a car. Even if you lose your job, you'll still have a place to live and sleep.
Replacing a car at three-year intervals (assuming that you buy and not lease) gets you at least past the biggest bath taken on depreciation, as the steep depreciation curve, with most vehicles, starts to flatten out after 2-3 years. It's not as economical as keeping them 5-6 years, but, if you put a lot of miles on them, you can run into significant repairs at that 5-6 year age. Besides normal maintenance-items, with normal mileage and driving habits, the most likely things that will need replacing in the first three years are tires and brake-pads...figure 30-40K on average, though that can vary a bit by vehicle.
Almost 50 years I drove company car. Replacement when 3 year old or reached 100 K Km. When I retired I took the one I was driving which was pretty well optioned out of my pocket for whole sale value. From then on I pay in full when I get new ones as well as wife's
02-18-18, 06:04 PM
#27
Lexus Fanatic
, but simply (per the thread-topic) how it involves buying a car. The average person doesn't invest for a lifetime to simply buy one vehicle...and many only keep a car for a couple of years. Fixed-income investments, BTW, did work for me in the long run.....but I realize that my personal situation, especially before I retired, was not necessarily the same as that of many others. Being unmarried, a house paid off, and without kids, I had fewer responsibilities and fewer other expenses.
Last edited by mmarshall; 02-18-18 at 06:08 PM.
02-18-18, 06:38 PM
#28
Lexus Fanatic
This is an old argument that has been beat to death on this forum. I will say that I have always financed cars, and for me it makes financial sense to lease cars vs finance them, and I certainly would never consider buying a car in cash, and have no interest in paying off my house until such time as I have no income from which to deduct the mortgage interest. Financially taking money out of my investments wouldn’t make sense, and because I can deduct vehicles for business expense and like to trade vehicles often, it only makes sense for me to lease
If you have a family and goals for a lifestyle for your family, education for your children and a retirement for yourself, you simply must invest or you will never have wealth. If I lived on 20% of my income and saved the rest in an account that wasn’t invested there’s no way I could retire or put my kids through college, and no way we could live any sort of lifestyle we would want.
If you have a family and goals for a lifestyle for your family, education for your children and a retirement for yourself, you simply must invest or you will never have wealth. If I lived on 20% of my income and saved the rest in an account that wasn’t invested there’s no way I could retire or put my kids through college, and no way we could live any sort of lifestyle we would want.
02-18-18, 06:51 PM
#29
Lexus Fanatic
It might have been beaten to death for us, Steve (and a few others), since we've discussed it a number of times, but there are always new people coming into the market (many just a few years out of high school or college) who don't have our experiences or accumulated knowledge, and are genuinely looking for some advice for that first purchase or lease. When I bought my first new car, for example, I just barely knew how to write a check, and had never had a credit card. I had enough in my bank-accounts (and then some) to cover it, but, yes, it made a big dent in that account, even buying an inexpensive compact.
Unfortunately, back then, the Internet did not exist, we didn't have social-media or forums like this, and one could not get 24/7 advice around the clock. Now, we can.
Last edited by mmarshall; 02-18-18 at 06:58 PM.
02-18-18, 10:44 PM
#30
Intermediate
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