Tell us about your auto loan...

[PWMDMD]

If you can afford $450/mth to the bank CEO why wouldn't you pay yourself $400/mth preemptively for the same vehicle? Our country, from the ground up, struggles to think long term. Me, me, me, now, now, now. Often, even with 0%, the cash off offer instead of the 0% is often a better deal.

Very limited circumstances where I might get a loan. Emergency, unplanned type stuff.

I guess conservative has a different meaning now.

Lol...and some of us just want a particular vehicle and to move on with life and find it totally worth it to pay the bank $1000 and change to write a $15k down payment check instead of a $50k check - even though we could.

This thread is epic and it drips with judgement. Yes, sure, I agree too many people finance **** they can’t afford and they end up with nothing left at the end of their lives but understand lots of people finance things they can afford simply for cash flow purposes and to free up money to do other things in their lives. Seriously, that $35k is doing a lot more for me sitting in retirement with an average 10-year return of +10% per year than it’s costing me at 1.9%. I do really wish more in our country would learn to think long term...lol.

 

[GON]

Just remember... a banks best customer is one who pays late and pays the late fees for being late on their payment..... Not one who pays on time or early.

 

[HowAboutThis]

Lol...and some of us just want a particular vehicle and to move on with life and find it totally worth it to pay the bank $1000 and change to write a $15k down payment check instead of a $50k check - even though we could.

This thread is epic and it drips with judgement. Yes, sure, I agree too many people finance **** they can’t afford and they end up with nothing left at the end of their lives but understand lots of people finance things they can afford simply for cash flow purposes and to free up money to do other things in their lives. Seriously, that $35k is doing a lot more for me sitting in retirement with an average 10-year return of +10% per year than it’s costing me at 1.9%. I do really wish more in our country would learn to think long term...lol.

Very limited circumstances would include calculating a 5,6,7 whatever year return with an average investment return and seeing what the "on average" loss or gain is. For some, yes, might make sense. I'm guessing it makes less sense more often for many.

 

[HowAboutThis]

You paid off a new Corvette in 1 month ?

If he preemptively saved $x.xx/mth after paying other cars off, for, say, 6,7 or 8 years, his payment is lower to himself than to a bank that charges interest.

I've seen a few new Vettes around now that it's nicer out. Love the styling! Enjoy!

 

[javacontour]

I agree with you, but I think it is not that simple.
If credit is cheap and you can get a decent return on your investments, then using credit can be investing with someone else's money.
Instead of paying cash for our Tesla, if I had borrowed the money and put the cash into TSLA, I would have well over $500K.

But basically, don't put money into a depreciating asset.
Cars are depreciating assets.

This!

It's a question of risk and reward.

If you are just starting out and have nothing saved or invested, plowing $450/month into a car payment and not saving/investing for your future may not be the best move. You can buy a $10k car, or a $5k car or whatever and do fine. Might be harder to find RIGHT now due to a strange market. But in the long term, such a ride could serve you well starting out. So you pay under $200/month for the car and start putting away $250-350 each month for your future.

When the market is up 20,30, or 40% each year, it would be foolish to take money off the table to buy a car. That is of course assuming the market isn't about to correct.

I don't try to time the market. Long term, I'm pretty aggressive and am looking for 10-12% and have been close to the 12% mark over the long term.


So why wouldn't I borrow someone's money at 0%-4% if I'm getting 12% or more on what I have in play?

Could I go out and buy a BMW or Mercedes or Audi, or Alfa Romeo, or similar? Sure I could.

A used Mazda3 works for me.

Does that work for everyone? Of course not. If it did, all you would see in the market would be Mazda3's.

We spend our money traveling. A couple of weeks ago in Orange Beach, AL. This summer a 10 day trip out west. We did a cabin in Missouri over a long weekend in January, Milwaukee last October, Arkansas late September, and so on.

You spend your money as you see fit. Save some for tomorrow, and don't expect others to bail you out regardless how you choose to use it.

 

[PWMDMD]

Very limited circumstances would include calculating a 5,6,7 whatever year return with an average investment return and seeing what the "on average" loss or gain is. For some, yes, might make sense. I'm guessing it makes less sense more often for many.

The market was up 15-20% in 2020? I’m no mathematician but I can easily see +15% is better than -1.9%. At least for 2020, I’m made the correct choice.

 

[javacontour]

The market was up 15-20% in 2020? I’m no mathematician but I can easily see +15% is better than -1.9%. At least for 2020, I’m made the correct choice.

With dividend reinvestment the S&P500 was up 17.88% in 2020.

 

[CheezWhiz]

time value of money is real. i sold stock and paid off a rental years ago. had i held the stock, i could sell it today and pay off my other rental. instead, i still have a mortgage on the second property.

when you are young, borrow cheap and accumulate assets. when you approach retirement, consolidate into lower risk investments.

 

[GoldDot40]

For what it's worth, a vehicle loan is and will never be a one size fits all deal. Way too many variables affects loan rates such as which lender the dealership uses, your credit score, your debt to income, your region, etc, etc.

Car insurance is the same. Where I may get an outstanding premium rate with a certain company, the next guy may not get anywhere close to the same rate with that same company due to those variables.

 

[xBa380]

$40,000ish at 1.75% for 60 month. Payment is $700/mo.

 

[HowAboutThis]

time value of money is real. i sold stock and paid off a rental years ago. had i held the stock, i could sell it today and pay off my other rental. instead, i still have a mortgage on the second property.

when you are young, borrow cheap and accumulate assets. when you approach retirement, consolidate into lower risk investments.

The market was up 15-20% in 2020? I’m no mathematician but I can easily see +15% is better than -1.9%. At least for 2020, I’m made the correct choice.

Anyone making 12% per year over a lifetime oughta start their own hedge fund. Or they're young and just started investing since 2008 when all the market does is go up.

 

[PWMDMD]

Anyone making 12% per year over a lifetime oughta start their own hedge fund. Or they're young and just started investing since 2008 when all the market does is go up.

Who cares about prior to 2008? We're talking about the realities of 2020 into 2021, whether or not you should buy your vehicle outright or take out a super low-interest loan, and the reality is right now it makes more sense to take super low-interest loans on vehicles and take as much cash as you can and invest it. At some point in my life this may not be the case but right now it is most certainly the best use of money.

 

[CourierDriver]

I usually had company cars, have not bought a car or truck in my name since the mid 80s,best I can remember,,,my wife bought all the cars she wanted in her name, lol,,,2010 F150 is all I own now, guess at 75 I will drive it till they call me up yonder,,,I did not buy the F150 , it was hers,lol

 

[javacontour]

Who cares about prior to 2008? We're talking about the realities of 2020 into 2021, whether or not you should buy your vehicle outright or take out a super low-interest loan, and the reality is right now it makes more sense to take super low-interest loans on vehicles and take as much cash as you can and invest it. At some point in my life this may not be the case but right now it is most certainly the best use of money.

Or they did not sell the dips and drops so when it came back their losses were gone.

They may have kept buying, staying the course so those buys when the prices were low help pull up the average.

 

[ryster]

You can't take your car or money with you at "the end". Either enjoy it now while you know you can, or save money and hope you will be able to enjoy it later on down the road.

In general, most people are doing the best they can to live within their means and still navigate life. If that means taking out an 84 month car loan that is their choice. While some of us might not agree with it, it works for them.

I know someone that took out a 6 year loan ($12.5K @4%) on a 5 year old pre-owned minivan. Personally, I could have (and would have) paid cash for it and walked away. This person absolutely needed the van and did not have that much to plunk down. Their only option to be able to get the van, and still afford to live life, was to pay for it over 6 years. They are happy, it fits in their monthly budget, and that is all that matters.

 

[Tdbo]

Regarding my current car loan:
Financed through Honda Financial for 48 months at 0.9%
With a 56% downstroke, $339.48/month.
Put enough down so that payment would fit comfortably in monthly budget, and allow as much cash as possible to remain in investments.
Since there was no further discount for refusing the finance subsidy, and I was paying for it anyway through the purchase of the vehicle, I decided to access the cheap money.

 

[doitmyself]

This thread is epic and it drips with judgement.

That's been one of the negative hallmarks of BITOG for well over 10 years. People with somewhat bigoted opinions insisting that their way is the only way and everyone else is wrong. I.E., comments like "if you can't pay cash, you cannot afford the car", when many in this thread have shown that a person can finance a car and still be fiscally responsible. The same thing comes out during food and television discussions. I don't see it this bad on other forums I participate in.

 

[MRC01]

Man those are some crazy numbers. I don't borrow when I buy a car. Only cash but if they off less then 2%, I might bite.

Same here. Less than 2% is free money, since the cash I would normally pay would otherwise earn CAGR of 7-8 % if I weren't spending it on a car.
Our last new car offered 4 years at 0 % interest.
4 years at CAGR 7.5% = 33.5%, on 25k is $8375. That is the opportunity cost of paying cash.

 

[HowAboutThis]

time value of money is real. i sold stock and paid off a rental years ago. had i held the stock, i could sell it today and pay off my other rental. instead, i still have a mortgage on the second property.

when you are young, borrow cheap and accumulate assets. when you approach retirement, consolidate into lower risk investments.

The market was up 15-20% in 2020? I’m no mathematician but I can easily see +15% is better than -1.9%. At least for 2020, I’m made the correct choice.

Anyone making 12% per year over a lifetime oughta start their own hedge fund. Or they're young and just started investing since 2008 when all the market does is go up.

Who cares about prior to 2008? We're talking about the realities of 2020 into 2021, whether or not you should buy your vehicle outright or take out a super low-interest loan, and the reality is right now it makes more sense to take super low-interest loans on vehicles and take as much cash as you can and invest it. At some point in my life this may not be the case but right now it is most certainly the best use of money.

As I've stated, it might. Depends on your credit rating, what interest rate your investments are getting on average, how much you're borrowing and the interest rate you're getting, etc. It's nuanced and case by case. My point: there's no blanket "it's better to get a loan" or "it's not better to get a loan." Maybe the articles I read are fake news, but given the average household income, average credit score, and average car selling price, I have a hard time believing a change in financial habits wouldn't benefit many Americans. With that said, as I stated before too, there are exceptions. Emergencies, actually crunching the numbers of each choice, etc.

 

[PWMDMD]

Anyone making 12% per year over a lifetime oughta start their own hedge fund. Or they're young and just started investing since 2008 when all the market does is go up.
As I've stated, it might. Depends on your credit rating, what interest rate your investments are getting on average, how much you're borrowing and the interest rate you're getting, etc. It's nuanced and case by case. My point: there's no blanket "it's better to get a loan" or "it's not better to get a loan." Maybe the articles I read are fake news, but given the average household income, average credit score, and average car selling price, I have a hard time believing a change in financial habits wouldn't benefit many Americans. With that said, as I stated before too, there are exceptions. Emergencies, actually crunching the numbers of each choice, etc.

Sure, "it might". The tone of your post wasn't that "it might" matter in some situations but that this was a widespread problem in America of short-term thinking, poor long-term planning, an aversion to delayed gratification, and an attack on conservative values.

My point is for LOTS of people it probably makes perfect sense to take a low-interest loan. It really isn't that difficult to qualify for the low-interest loans and most people with a 401K can kill 1.9% in performance. In the end, I agree, everyone's situation is different but many of these posts (not just yours but others too) present the idea of taking a loan as being bad or negative or a sign of poor judgment and it very well may not be the case.