This isn't to cast judgment on anyone. Different people have different backgrounds and value systems and that is okay. I'm mechanically inclined and have time and space to perform vehicle maintenance and repairs. Not everyone has access to this. That is okay. Our newest vehicle is a 2016 Toyota currently with 32k miles. We bought it in 2021 after saving up and paying cash for it. We are not wealthy people. My daily driver is a 26-year old Dodge with 173k mikes. It runs well and is in great shape for it's age. I paid $1000 cash for it. It doesn't bother me that I drive an aged vehicle and I don't allow it to define my self image or status in life. For the last 13-years we've been investing what could amount to a healthy car loan into Roth IRAs. These have exceeded my expextions in terms of growth and this makes me happy. This is my value system and it works for me. From my experience I don't find car loans in general to be necessary. Again, this is my value system and it works great for us.
84 month car loans
- Thread starter Hirev
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There isn't a 7 year lease that I know of. People can't afford a 4 year lease probably are the one ended up in a 7+ year loan.
The manufacturer who deal with the lease likely know the risk and don't want anything to do with more than 4 years. The one doing 7-10 year lease are likely subprime instead of the financing arm of the manufacturer and they don't mind having a bad reputation when they repo a junk after predatory loan default. Look what happen to Nissan, it would be twice as bad if the manufacturer do their own 7 year lease or 10 year loan just to dump vehicles.
My father taught me a lesson that I never forgot: Don't buy a car if you can't afford to pay it off in 3 years or less.
The strategy is simple, but requires financial discipline. Pay off the car in 3 years or less, then drive the car for another 3 or 4 years...and continue to pay yourself that car payment every month. I have a separate bank account just for this purpose. You'll have $20,000 saved up before you know it. I wasn't able to do it as a young adult starting life, but I eventually got there. My current "future car" account has $23,000 and will have $30,000+ when I'm ready to buy again. With that bank account and the trade-in value, my next Chevy Equinox will have a zero interest loan for zero months...if I don't hit a bleeping deer first. LOL
I realize that 3-year loans are challenging for a $70,000 pickup truck...even for high income earners. However, if you can afford it, do the 60-month loan instead of the 84-month, then pay yourself for a couple more years. If you have the discipline, the next vehicle purchase will be less painful.
The strategy is simple, but requires financial discipline. Pay off the car in 3 years or less, then drive the car for another 3 or 4 years...and continue to pay yourself that car payment every month. I have a separate bank account just for this purpose. You'll have $20,000 saved up before you know it. I wasn't able to do it as a young adult starting life, but I eventually got there. My current "future car" account has $23,000 and will have $30,000+ when I'm ready to buy again. With that bank account and the trade-in value, my next Chevy Equinox will have a zero interest loan for zero months...if I don't hit a bleeping deer first. LOL
I realize that 3-year loans are challenging for a $70,000 pickup truck...even for high income earners. However, if you can afford it, do the 60-month loan instead of the 84-month, then pay yourself for a couple more years. If you have the discipline, the next vehicle purchase will be less painful.
Well - while, I agree that people take loans that are far too long, and that they spend way too much money on cars, I’m not sure the hard and fast rule of “ If you can’t pay for it in 36 months, you can’t afford it” is true in every case.
I’ll give you an example: I bought my Tundra with 0.9% financing, and I financed it over 60 months. Way over that rule, which I’ve heard many times before.
Why?
Well, I got a couple grand off the price of the truck and at the time my savings account was paying a lot more than that. So I took the longer note, at low interest, and left the cash in the bank, where it was making more.
In addition to a good price on the truck, Toyota was willing to loan me money for much less than I was making on interest on the cash.
I could’ve written a check.
I chose not to.
I’ll give you an example: I bought my Tundra with 0.9% financing, and I financed it over 60 months. Way over that rule, which I’ve heard many times before.
Why?
Well, I got a couple grand off the price of the truck and at the time my savings account was paying a lot more than that. So I took the longer note, at low interest, and left the cash in the bank, where it was making more.
In addition to a good price on the truck, Toyota was willing to loan me money for much less than I was making on interest on the cash.
I could’ve written a check.
I chose not to.
Ah yeah well compared to a Wrangler the pilot would feel huge on the inside and have captains chairs.. haha. Plenty of nice body on frame options out there though.
Sounds like we got the same deal on our Tundras!
And, while I could've also written a check for $47,500, for the cost of a couple hundred dollars per year, I knew there were quite a few other uses for that money that would (did) give me a return several orders of magnitude more than it cost me to borrow that money over 6 years.
Chat did the math here:
$47,500 Truck: Finance vs. Pay Cash (6 Years)
- Truck price: $47,500
- Loan: 0.9% APR for 72 months
- Monthly payment: ≈ $677
- Total interest paid: ≈ $1,265 (about 2.7% of the truck's price over six years)
- 8% annual return: Investment grows to ~$75,400 (gain of ~$27,900). After subtracting loan interest, you're ahead by ~$26,600.
- 10% annual return: Investment grows to ~$84,100 (gain of ~$36,600). Net advantage after interest: ~$35,400.
- 12% annual return: Investment grows to ~$93,800 (gain of ~$46,300). Net advantage after interest: ~$45,000.
QQQ returned about 21.5% per year since 2020 and so that $47,500 became $152,700. I don't know many people who wouldn't pay $1265 to get $152,700! Six years later, I still own the truck but I have an extra $105,200.
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Pilots are great vehicles but I tend to stick with rear wheel drive when possible. They are a bit large but the newer Armada with GT-R engine heritage is interesting. A bit on the expensive side for not having a luxury badge though. Would be nice to have another option to tow our boat as well.
I was not suggesting a 7 year lease, though I can see how you might have thought that.
People need to live withing their means, which for many people is a tough sell.
Well, yeah, it’s a tough sell, because it means self-discipline, and delayed gratification - which is the opposite of what people want - and what they are being sold by “influencers”…
2-3 yo Armadas and QX-80’s are some of the Best Buy’s out there imo
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We need to clarify what exactly is being considered as ‘growth’ mutual funds. However, here is another well known financial person’s advice on subject:
Warren Buffett’s 90/10 rule urges everyday investors to keep 90% of their money in a low-cost S&P 500 index fund and the remaining 10% in short-term government bonds.
Warren Buffett went on to explain that in his will, he advised the appointed trustee to invest the cash he planned to leave his wife the same way: 90% in a "very low-cost" S&P 500 index fund and 10% in short-term government bonds.
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