Despite good economy, many still in trouble with car loans.
02-13-19, 01:06 PM
#46
Lexus Fanatic
I like your thought process with that - and agree it is very difficult for most people to pay themselves (save) each month. The tendency is typically to allocate that $2k/month elsewhere after the cars (Camry & Accord in your example) are paid off instead of saving.
I was a total outlier among my co-workers a few years ago - we didn't receive company cars but got $.50/mile for driving (we had to pay for gas, repairs, etc. out of pocket). I was driving about 40k miles/year and paid off my car in 12 months by just making my normal payment amount + 100% of the mileage amount I received. After that car was paid off, I was able to pay off our LX in under 15 months using the same philosophy. Everyone else was buying bigger, better and more expensive cars every 12-18 months. I didn't mind or judge based on what they were doing - I just have a different approach that fits my financial narrative.
I was a total outlier among my co-workers a few years ago - we didn't receive company cars but got $.50/mile for driving (we had to pay for gas, repairs, etc. out of pocket). I was driving about 40k miles/year and paid off my car in 12 months by just making my normal payment amount + 100% of the mileage amount I received. After that car was paid off, I was able to pay off our LX in under 15 months using the same philosophy. Everyone else was buying bigger, better and more expensive cars every 12-18 months. I didn't mind or judge based on what they were doing - I just have a different approach that fits my financial narrative.
02-13-19, 01:06 PM
#47
drives cars
I agree with you on this. I think Doug DeMuro explains something similar in his recent video about purchasing his Ford GT. He got a loan on it in order to not sink all his money into it at one time, so that he could continue to invest in other things.
02-13-19, 01:07 PM
#48
Lexus Champion
0% loan is essentially free money.
I agree if the interest on the loan is higher than any interest you are earning on investments, but if the interest you are paying on a loan is lower than the investments, you maintain the loan.. especially if it is 0% , but no one is giving 0% car loans anymore as far as I know.
I agree if the interest on the loan is higher than any interest you are earning on investments, but if the interest you are paying on a loan is lower than the investments, you maintain the loan.. especially if it is 0% , but no one is giving 0% car loans anymore as far as I know.
02-13-19, 01:11 PM
#49
Lexus Fanatic
0% loan is essentially free money.
I agree if the interest on the loan is higher than any interest you are earning on investments, but if the interest you are paying on a loan is lower than the investments, you maintain the loan.. especially if it is 0% , but no one is giving 0% car loans anymore as far as I know.
I agree if the interest on the loan is higher than any interest you are earning on investments, but if the interest you are paying on a loan is lower than the investments, you maintain the loan.. especially if it is 0% , but no one is giving 0% car loans anymore as far as I know.
Ps, I do not see value in having a car loan exceed the warranty period.
Last edited by Toys4RJill; 02-13-19 at 01:14 PM.
02-13-19, 01:15 PM
#51
Lexus Fanatic
0% loan is essentially free money.
I agree if the interest on the loan is higher than any interest you are earning on investments, but if the interest you are paying on a loan is lower than the investments, you maintain the loan.. especially if it is 0% , but no one is giving 0% car loans anymore as far as I know.
I agree if the interest on the loan is higher than any interest you are earning on investments, but if the interest you are paying on a loan is lower than the investments, you maintain the loan.. especially if it is 0% , but no one is giving 0% car loans anymore as far as I know.
02-13-19, 01:16 PM
#52
Lead Lap
Car Loan interest rates have gone up no doubt about that. However the 0% loan exists out there when the model in question is not moving, or they need to meet a sales target. GM was offering one recently on the enclave, tundra as well. It just depends on the timing.
02-13-19, 01:23 PM
#53
Lexus Fanatic
My point is people cannot control the housing prices and their income other than to move. So they don't work backwards to it. Should 2 physicians be able to live in Westfield, NJ? Why not? Maybe if pediatricians their income is $350k combined? Maybe more? But they might have a Corolla in the driveway as well, nothing strange about it.
02-13-19, 01:28 PM
#54
Lexus Champion
There are so many credit cards today offering 0% for 15 mos, I just opened one from Wells Fargo last week. Spend $1000 and get $200. Should I take her right up to the $25k credit limit? It's free, for more than one year. Or better yet, write a convenience check and invest in stocks. The temptation to go broke is pretty compelling. I don't know about you but I'm only getting 2.2% on my savings.
current 0%for 60-72 months car deals available, IF credit score above 750:
2019 Buick Lacrosse
2018 Chevy Silverado
2019 Ford Fusion
2018 Hyundai Sonata
2019 Kia Sorento
2018 Nissan Kicks
2018 Lexus RX
Current 0% interest for 36 months, then higher rate 37-72 months (rate determined by credit score)
2019 Ram 1500 2WD
2019 Subaru Outback
2018 Jeep Renegade
2018 Chrysler 300 base (does not apply to the 300c)
All with the exception of the Lexus state they are for dealer inventory of entry level models, higher optioned models "may not" be eligible.
02-13-19, 01:33 PM
#55
Pole Position
I think he's saying if you have the ability to overpay on a car (depreciating asset) that you should instead take that over-payment amount and invest it instead of paying more towards the car. Effectively he's asking why would you throw money at an asset that's going down in value instead of throwing money at things that could/will go up in value? It's the same thought process to having $100k sitting in the bank but choosing to take the 0% loan on a $60k car and just pay $1k/month while your money works for you for 5 years instead of paying cash for the car. You really have no incentive to pay it off because you'd lose somewhere in the neighborhood of $8k to $10k by doing so in this example (if you invested your $100k at 2% per year). People who are debt-averse don't want a $1k/month car payment so they'll just pay cash for the car and may not realize the strange decision they've made.
If I'm correct in my assumption of what he's saying, it assumes you either have the ability to accelerate payments on a car note, or it assumes you have enough money in the bank to pay off the car entirely (early).
People who embrace debt and leverage it intelligently have a different approach... But you need to be in certain financial situations in order to do so.
If I'm correct in my assumption of what he's saying, it assumes you either have the ability to accelerate payments on a car note, or it assumes you have enough money in the bank to pay off the car entirely (early).
People who embrace debt and leverage it intelligently have a different approach... But you need to be in certain financial situations in order to do so.
02-13-19, 03:38 PM
#57
Super Moderator
"Annual income twenty pounds, annual expenditure nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pound ought and six, result misery.”
― Charles Dickens, David Copperfield
02-13-19, 04:01 PM
#58
Lexus Fanatic
I think he's saying if you have the ability to overpay on a car (depreciating asset) that you should instead take that over-payment amount and invest it instead of paying more towards the car. Effectively he's asking why would you throw money at an asset that's going down in value instead of throwing money at things that could/will go up in value? It's the same thought process to having $100k sitting in the bank but choosing to take the 0% loan on a $60k car and just pay $1k/month while your money works for you for 5 years instead of paying cash for the car. You really have no incentive to pay it off because you'd lose somewhere in the neighborhood of $8k to $10k by doing so in this example (if you invested your $100k at 2% per year). People who are debt-averse don't want a $1k/month car payment so they'll just pay cash for the car and may not realize the strange decision they've made.
If I'm correct in my assumption of what he's saying, it assumes you either have the ability to accelerate payments on a car note, or it assumes you have enough money in the bank to pay off the car entirely (early).
People who embrace debt and leverage it intelligently have a different approach... But you need to be in certain financial situations in order to do so.
If I'm correct in my assumption of what he's saying, it assumes you either have the ability to accelerate payments on a car note, or it assumes you have enough money in the bank to pay off the car entirely (early).
People who embrace debt and leverage it intelligently have a different approach... But you need to be in certain financial situations in order to do so.
I believe in ownership and paying things off ASAP. IMO it’s the best way. If someone else thinks a different way, good for them, I am not trying to change their opinion. All the power to them.
02-13-19, 04:20 PM
#59
Lexus Test Driver
I don't think I've ever had 2 car payments that totaled $1,000/mo.
And...average mortgage? The average home price in the US is under $250,000. So "average mortgage" has no place in a discussion about a $1,000 monthly car payment--that payment is higher than the average mortgage payment.
Last edited by tex2670; 02-13-19 at 04:24 PM.
02-13-19, 04:27 PM
#60
Lexus Fanatic
I can't answer that. I wouldn't do that unless I hit the MegaMillions--not at this stage with multiple college tuitions still on my horizon. It's not just about current income levels.
I don't think I've ever had 2 car payments that totaled $1,000/mo.
And...average mortgage? The average home price in the US is under $250,000. So "average mortgage" has no place in a discussion about a $1,000 monthly car payment--that payment is higher than the average mortgage payment.
I don't think I've ever had 2 car payments that totaled $1,000/mo.
And...average mortgage? The average home price in the US is under $250,000. So "average mortgage" has no place in a discussion about a $1,000 monthly car payment--that payment is higher than the average mortgage payment.
Last edited by Toys4RJill; 02-13-19 at 04:31 PM.