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Car loans and interest rates

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2 hours ago, otsap said:

It's comical that anyone would try to assert their financial savvy while simultaneously arguing to buy a $58k vehicle.  All the arguments above become moot when compared to a $12k-14k vehicle that is about 4 years old and has around 40k miles on it.  What you could do with that extra $44k (!!!) is the real question.  Bubububut, reliability!  First, 4 year old vehicles with low miles do not lack reliability.  Second, even if they did, how many engines/transmissions/exhausts would you have to go through to burn up $44k?  Way more than you ever will.  Worried about being stuck on the side of the road once or twice during the life of the vehicle?  Don't be a baby; it's still not worth $44k.

You're now arguing that people are dumb because they choose to spend their money differently than you?

Should I save every dollar until retirement? Should I always just drive an old car that I maintain? Hell, let's grow our own food and make our own clothes.

It's entirely possible to be financially savvy and have a $60k car. Just because I may choose to spend my money on different things than you, doesnt make it wrong. Especially when interest rates are so cheap. I'm a car guy, so I like spending money on cars. You might like to fish, hunt, fly, travel, etc.. should I argue that you're "comical" for spending money on those things? Or that it obviously makes you not financially savvy?

Edited by Kenny Powers
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3 hours ago, Blue said:

Please identify these vehicles that "cost just a few thousand dollars (or much less)," and also have the safety and reliability of a new car?

You can't buy a 2006 Honda Accord for a few thousand dollars?  Kelley Blue Book says you can.

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6 hours ago, Standby said:

Exactly. Which is why it makes no damn sense to pay cash for something when I can take a 1.49% loan on a car and pay down a mortgage quicker or put that cash to work in a different investment vehicle. 

No...it makes no damn sense to spend money you don't have on a luxury item.  What other luxury items (especially those that depreciate) are you ok with purchasing that requires a loan with interest? 

 

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32 minutes ago, HeloDude said:

No...it makes no damn sense to spend money you don't have on a luxury item.  What other luxury items (especially those that depreciate) are you ok with purchasing that requires a loan with interest? 

 

Explain. Define "money you dont have." As in, are you suggesting I should pull money out of investments or emergency funds when it's time to buy a new car?

Edited by Kenny Powers

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I would argue that if I had cash for a car that money would work more effectively for me in an investment while I pay 1.49 or 2.9 percent interest on the car. Market willing I will still have a long term gain.

Maybe i don’t understand the argument here but I can see where the loan can be a benefit in the long term.


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2 hours ago, Kenny Powers said:

Explain. Define "money you dont have." As in, are you suggesting I should pull money out of investments or emergency funds when it's time to buy a new car?

No, I'm suggesting then suggesting that you don't buy a new car.

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2 hours ago, Bode said:

I would argue that if I had cash for a car that money would work more effectively for me in an investment while I pay 1.49 or 2.9 percent interest on the car. Market willing I will still have a long term gain.

Maybe i don’t understand the argument here but I can see where the loan can be a benefit in the long term.


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Why are you purchasing such an expensive car that you can't just afford outright without a loan?

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12 minutes ago, HeloDude said:

No, I'm suggesting then suggesting that you don't buy a new car.

Why? Because you wouldn't spend your money on it?

I bet most people spend more every month on Starbucks and fast food than I do on a car payment.

The math is simple. If you cant understand it or if you aren't the type of person that is ok with debt, then fine. But you're crazy if you think I should use my money to buy a car vs borrowing money for super cheap, when my investments can out perform the interest of the loan by a significant amount.

Regardless of the price of the car, the math doesnt change. Even if I was buying a car for $5k, I'm still better off borrowing that money.

Edited by Kenny Powers
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Why? Because you wouldn't spend your money on it?
I bet most people spend more every month on Starbucks and fast food than I do on a car payment.
The math is simple. If you cant understand it or if you aren't the type of person that is ok with debt, then fine. But you're crazy if you think I should use my money to buy a car vs borrowing money for super cheap, when my investments can out perform the interest of the loan by a significant amount.
Regardless of the price of the car, the math doesnt change. Even if I was buying a car for $5k, I'm still better off borrowing that money.

This completely.

Also, some people like to buy cars, others tattoos. Some spend money on expensive phones or computers. Everyone has their vice. My is driving fun cars. So I’m going to enjoy my
Life and drive the car I want so I can enjoy life a bit. With that said, it’s been numerous years since I have had a car payment and because I spent a little extra money I have a car which will probably drive another 15 years before the wheels fall off.


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3 hours ago, HeloDude said:

Why are you purchasing such an expensive car that you can't just afford outright without a loan?

Dude, it’s not about the ability to purchase with cash. This is about the decision to finance because it’s more financially sound to “make that money work for us” elsewhere. Live within your means...agree 100%. To say that people shouldn’t buy new cars or enjoy luxury items is asinine though...especially if they have the disposable income to do so. 

I assume you don’t have a watercraft or airplane and subsequently assume you never will. 

Have an extreme net worth doesn’t mean fvck all if you didn’t get to enjoy it along the way. 

Edited by Standby
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GD dave ramsey. Best and worst thing to happen to personal finance talking points in recent memory.  Like dude.. we get it, dave said debt is bad.. you don't need to continue berating the entire room with what you heard dave say on his sunday morning talk show.  JFC.

Whoever asked about best rates - Navy Fed, Pen Fed, nearest CU, or ask the dealer what their best rate is.  Personally, I hope we're nearing the horizon of the next slowdown.. it may not be for a while yet, but the 10+ year bull market has kept prices of some luxury items I want artificially high.  A good recession would clobber some people who shouldn't have bought them and prices will come down.

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25 minutes ago, Standby said:

Dude, it’s not about the ability to purchase with cash. This is about the decision to finance because it’s more financially sound to “make that money work for us” elsewhere. Live within your means...agree 100%. To say that people shouldn’t buy new cars or enjoy luxury items is asinine though...especially if they have the disposable income to do so. 

I assume you don’t have a watercraft or airplane and subsequently assume you never will. 

Have an extreme net worth doesn’t mean fvck all if you didn’t get to enjoy it along the way. 

^exactly

Heard this debt argument before...it’s dumb. Absolutely nothing wrong with a car loan. Enjoy your life and do the things you want to do. Pay your bills on time. Stuff happens and things could be over tmrw. If other people don’t agree with what you do with your $$ tell them to eat a bag of dicks 

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2 hours ago, MDDieselPilot said:

Personally, I hope we're nearing the horizon of the next slowdown.. it may not be for a while yet, but the 10+ year bull market has kept prices of some luxury items I want artificially high.  A good recession would clobber some people who shouldn't have bought them and prices will come down.

Most definitely prices have gone crazy. Watching the prices of stocks, real estate, collectors’ cars, and nice watches over the last handful of years has made me head spin. Hell, the last AOPA Flight Training Magazine mentioned that mid-60’s to mid-70’s Skyhawks have gone up 25% in a quarter (if I’m remembering the stats correctly). That’s kinda nuts. 

A downturn will definitely send people that overextended to the exits and bring prices back out of the stratosphere (or we’ll get stagflation, which sucks too).

I like watches and I said I’d get a cheapie vintage 5500 Rolex Air King (pretty low end Rolex, but I like its simplicity) if I was able to pull off getting a pilot slot at advanced age, but prices have jumped quite a bit in the last few years that it doesn’t make sense. Maybe I’ll wait until training is over to see if things have come down? And maybe to not put the cart too far in front of the horse, since I’ve still got a long way to go until it’s a given I’ve made it...

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7 hours ago, HeloDude said:

No, I'm suggesting then suggesting that you don't buy a new car.

If I have $69k in non-retirement investments, I don’t want to pull any of it to buy even a $16.9k used car when the interest rates are less than historical inflation. It’s simple: keeping that $16.9k in investments accrues more money (crash notwithstanding); if you buy a $16.9k used car with that money instead, it still depreciates...meaning you lose more relative to keeping the money in investments and using a low interest loan.

 

Your concept is a loser if you can execute a simple budget. 

Edited by SurelySerious

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9 hours ago, MooseClub said:

^exactly

Heard this debt argument before...it’s dumb. Absolutely nothing wrong with a car loan. Enjoy your life and do the things you want to do. Pay your bills on time. Stuff happens and things could be over tmrw. If other people don’t agree with what you do with your $$ tell them to eat a bag of dicks 

Once again you guys only hear/read what you want to.  I have never said debt is bad...hence why said this isn't about purchasing a house which holds value, can last several decades plus, etc.  It's about buying luxury items that lose value quickly, when you obviously cannot afford it outright without taking on more debt.  

I find it hilarious that you guys think I'm spouting nonsense, yet a little research will show you that the majority of Americans have a problem buying things they can't afford.  But hey, it's your money...or not lol.

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2 hours ago, torqued said:

Words

Any cash I use to buy anything is money I cannot put into the market.

If I can borrow your money for damn near nothing and invest all mine, I will.

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42 minutes ago, HeloDude said:

It's about buying luxury items that lose value quickly, when you obviously cannot afford it outright without taking on more debt.  

How do you know what people can and can’t afford? You erroneously assume that people who finanace expensive items can’t pay cash for them. It might just be they have more financial discipline and elect to take a 0 or low interest rate loan to smartly invest elsewhere. 

I think the question was answered already. NFCU gives the best auto loan rates for new purchases. If you can wait until the year end clearance events, go for a a manufacturer 0% financing deal on an 18 model. 

Edited by Standby

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27 minutes ago, Kenny Powers said:

Any cash I use to buy anything is money I cannot put into the market.

If I can borrow your money for damn near nothing and invest all mine, I will.

That’s a logical thought process and you’ll likely be fairly successful while the economy grows. Recessionary periods will be more challenging but as long as you borrow responsibly you will be perfectly fine. 

Financial discussions and strategies can be argued to the same level as religion and politics.

I happen to be on the other side as you when it comes to car loans but if it works for you then fantastic! 

To each their own. 

Edited by PilotCandidate
Wording

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On 10/19/2018 at 6:34 AM, WheelzUp said:

but ole’ Dave Ramsey didn’t get rich selling books for no reason.

And most people don't build wealth by dropping 30k out of their savings to buy a car (...not smartly leveraging)....or with W2 income in general.  I don't think about if I can afford something, I think how can I afford it.  

16 hours ago, HeloDude said:

Why are you purchasing such an expensive car that you can't just afford outright without a loan?

Why are you NOT using a cheap loan?  If I buy a car (I recommend used use as well) for 30k @ 3% for 48 months, I'll have a payment of $660/month and pay a total of $1,800 in interest over the life of the loan.  With that same 30k, I bought a rental property that nets me ~$700/month, after I pay all my expenses and account for mx/vacancy.  For the first 48 months of my mortgage the tenant is paying ~$250/month in principle, which is just more cash (via equity) in my "pocket."  This doesn't even take into account my tax savings, which has been huge!  In that 48 months my investment has paid for that car (with 2k left over), earned me 12k in equity, saved me a quite a bit in taxes and has increased in value by 5 or 10k.  Or I could pay 30k cash and have the same car that is still not worth what I paid for it.

In general, I agree with you that if you're not going to do anything with that money, then yes save up and pay cash.  However, if you're just the least bit motivated, there is so much more you can do with your money. 

That said, I still own the same compact to mid-size car that cost me 15k over 12 years ago as I left of UPT.  I expect it will last another 10+ years as my airport car.  Cars are not my thing...as long as it gets me A to B in relative comfort, I'm mostly happy. 

13 hours ago, MDDieselPilot said:

GD dave ramsey. Best and worst thing to happen to personal finance talking points in recent memory. 

Agreed!  His stuff is so basic for the average person on this forum, but for a HUGE portion of Americans it's absolutely needed.  It's a great place to start to build a solid foundation, but that's it...a start.  

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False dichotomy. Both positions are correct at the same time. Not everybody borrows because they can't afford it. And most of America's behavior towards borrowing is motivated by the sheer inability to afford their lifestyle on the real wages they get paid in this craptastic McWage american labor landscape.

An economy where the govt brags about everybody being employed (U3) but nobody gets paid shit (U6 by proxy). Neither the government nor the "mouth breathers" ever want to talk about that dichotomy though. So the street borrows for everything instead, inflating the price of everything. Those of us who don't subscribe to that life outlook get dragged into inelastic choices, and divorces ensue when hypergamy is not acquiesced to (ask me how I know).

I have it on good authority most Americans recognize they're screwed in non-working life (I refuse to call it retirement, that concept is dead for post-millenials). The act of mortgaging their future labor value is thenceforth not only a sunk cost, but the rational choice when staring at the indignity of American life the very month the W-2 stops.

Telling 250 million working age people to stop sucking at math and "become landlords" or "daytraders" is not incorrect on the technical merits, but it is tone deaf af. Equally tone deaf to mock/scorn W-2 life in general by suggesting it's [accurately] an insolvent way to become financially free, then not addressing the arithmetic impossibility of everybody being everybody's "landlord"/surgeon/WB FO/potato. Again, the canyon of living in the world of what things should be v. the world of what things are. But as always, "Better lucky than good", "better you than me", "timing and luck", "there is no justice"// pick your platitude...Nothing to see here. To each their own indeed wrt to borrowing. 

 

 

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You can do Dave Ramsey, and guess what Uncle Sam gets 55 percent when you die, and you can’t take it with you. Yolo. Yes, I know what estate planning is, and the 3.2 million GST is chump change. Enjoy life while you can.

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11 hours ago, Standby said:

How do you know what people can and can’t afford? You erroneously assume that people who finanace expensive items can’t pay cash for them. It might just be they have more financial discipline and elect to take a 0 or low interest rate loan to smartly invest elsewhere. 

I think the question was answered already. NFCU gives the best auto loan rates for new purchases. If you can wait until the year end clearance events, go for a a manufacturer 0% financing deal on an 18 model. 

Exactly what I did when we bought my wife's new car. I could either pay cash, or take the 0.9% interest rate. With inflation holding at around 3%, it would literally cost me more in buying power to pay cash.

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I like buying used cars with <50k miles and for <15k cash. I have no data to back this I just do it and will always will and still don’t care to argue the benefits of It. it’s all a personal choice. 

 

I do however, cap lap dance prices at <30 bucks. Any thing else is just inflation. 

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