Average new car payment $554

[fdcg27]

Originally Posted by HowAboutThis
Toyota right now: pay someone the low low 1.9% interest rate OR get an extra $1500 off and pay cash. One you're losing interest. The other you're paying yourself in interest AND getting $1500 off up front. If you have cash sitting around prove to me the second option is worse in cold, hard, sociopathic numbers I'll take a look. Otherwise, just admit you're OK losing a few hundred dollars for feeling more secure. It's ok to admit. LOL


Don't know about that.
I do know that I almost felt embarrassed paying $19.2K for our '12 Accord and then getting 0.9% financing on top of that.
The car is now around 115K and it has needed a set of tires as well as brake pads all the way around as well as a few oil changes, LOL.
I got the '17 Forester for around invoice and didn't feel bad at all taking the 0% financing.
I paid $23.4K for the Accord Hybrid, since Honda had already knocked 10% off the list price for the car as compared to previous models and I got the dealer to knock another 10% off that. There was no cheap financing available for the Hybrid, so we just wrote a check for it.
In many cases, financing deals can make it less costly to take the money and run while keeping your own funds at work and not sunk in a car although you do have to consider both the costs of financing and the opportunity costs of paying cash.

 

[HowAboutThis]

Originally Posted by AuthorEditor
Let's say you borrow $30k at 1.9% and instead keep $30k in a pretty conservative mutual fund earning 5% compounded annually. You're ahead 3.1% the first year, and every year for the life of the loan. It's how banks make money. They essentially borrow from you at a low interest rate and invest the money where it earns a lot more.


If the interest rate difference between paying/making is big enough given the loan amount, there's a chance. I think your case might work out after a quick calculation. There's also the depreciation of the car and it's future value. However, I started investing in a Target date fund about 15 years ago and it's preforming well but my rate of return is only 6.5% over the last 15. 2008 messed it up. I'd say a "safe" fund would be more like a money market fund making about 2.2-2.5% and then your example wouldnt make it.

 

[fdcg27]

Originally Posted by HowAboutThis
Originally Posted by AuthorEditor
Let's say you borrow $30k at 1.9% and instead keep $30k in a pretty conservative mutual fund earning 5% compounded annually. You're ahead 3.1% the first year, and every year for the life of the loan. It's how banks make money. They essentially borrow from you at a low interest rate and invest the money where it earns a lot more.


If the interest rate difference between paying/making is big enough given the loan amount, there's a chance. I think your case might work out after a quick calculation. There's also the depreciation of the car and it's future value. However, I started investing in a Target date fund about 15 years ago and it's preforming well but my rate of return is only 6.5% over the last 15. 2008 messed it up. I'd say a "safe" fund would be more like a money market fund making about 2.2-2.5% and then your example wouldnt make it.


How not?
You pay 1.9% and realize 2.2%.
You're still ahead financing and depreciation and future value are irrelevant since they remain the same whether you borrow the money or lay out the cash.

 

[HowAboutThis]

Here's my math:
If you pay $30k cash and put what would have been the car payments into savings @ 2.2% for 5 years, $525/mth into savings, you end up with $33,300, a gain of $3,300.

If you take a $30k loan out @ 1.9% and leave your $30k in savings growing at 2.2% you
Pay an extra $1470 in interest and earn $3490 in interest. A net gain of $2,020.

That's how. Feel free to check my math if you'd like. I won't gurantee I didn't make an error somewhere with online calculators.

 

[PimTac]

Originally Posted by HowAboutThis
Toyota right now: pay someone the low low 1.9% interest rate OR get an extra $1500 off and pay cash. One you're losing interest. The other you're paying yourself in interest AND getting $1500 off up front. If you have cash sitting around prove to me the second option is worse in cold, hard, sociopathic numbers I'll take a look. Otherwise, just admit you're OK losing a few hundred dollars for feeling more secure. It's ok to admit. LOL




Sociopathic numbers? I'd like to hear how that comes about.

 

[AuthorEditor]

The S&P 500 has averaged 10% for 90 years. Put your money into a broad stock fund based on the S&P and you should do similarly, though of course past performance does not guarantee future returns. But, I skip the car payments, buying old cars for cash, and use most of my money for other things. To each his own!

 

[HowAboutThis]

Originally Posted by PimTac
Originally Posted by HowAboutThis
Toyota right now: pay someone the low low 1.9% interest rate OR get an extra $1500 off and pay cash. One you're losing interest. The other you're paying yourself in interest AND getting $1500 off up front. If you have cash sitting around prove to me the second option is worse in cold, hard, sociopathic numbers I'll take a look. Otherwise, just admit you're OK losing a few hundred dollars for feeling more secure. It's ok to admit. LOL




Sociopathic numbers? I'd like to hear how that comes about.


They are cold, hard, and factual, and don't care about you as a person and how they emotionally affect you LOL

 

[CKN]

Originally Posted by PimTac
Originally Posted by HowAboutThis
Toyota right now: pay someone the low low 1.9% interest rate OR get an extra $1500 off and pay cash. One you're losing interest. The other you're paying yourself in interest AND getting $1500 off up front. If you have cash sitting around prove to me the second option is worse in cold, hard, sociopathic numbers I'll take a look. Otherwise, just admit you're OK losing a few hundred dollars for feeling more secure. It's ok to admit. LOL




Sociopathic numbers? I'd like to hear how that comes about.



Here we go with the newer car envy on here. Let those who wish to buy newer cars alone-as well as those who want to drive beaters in to "automotive excellence" (aka 500,000 miles).

 

[HowAboutThis]

Originally Posted by CKN
Originally Posted by PimTac
Originally Posted by HowAboutThis
Toyota right now: pay someone the low low 1.9% interest rate OR get an extra $1500 off and pay cash. One you're losing interest. The other you're paying yourself in interest AND getting $1500 off up front. If you have cash sitting around prove to me the second option is worse in cold, hard, sociopathic numbers I'll take a look. Otherwise, just admit you're OK losing a few hundred dollars for feeling more secure. It's ok to admit. LOL




Sociopathic numbers? I'd like to hear how that comes about.



Here we go with the newer car envy on here. Let those who wish to buy newer cars alone-as well as those who want to drive beaters in to "automotive excellence" (aka 500,000 miles).


Nah dude. Do what you wish with your money. I just showed you come out ahead paying cash versus a $30k loan and those rates.

 

[MCompact]

Originally Posted by CKN


Remember-there are those on here who buy a $200.00 ( that's been in a flood) beater-and the goal is to drive it to a half a million miles and reach (in their opinion) the pinnacle of automotive excellence.


And if that car for the hair shirt brigade has manual windows and only AM radio ? Even better!

 

[Ws6]

You now own 100% of a vehicle that if totalled, you'll get maybe 80% back on. This is why I finance at low rates and get GaP. Risk someone elses money.

 

[Jarlaxle]

Originally Posted by Mad_Hatter
Originally Posted by Jarlaxle

They offered that for quite a while. I had it on my Magnum, I know someone who has it on a 2006 Charger.

At over 300,000 miles, it's still covered. (Covered doing the rear main seal at 302K.)


Nice, replacing those main seals ain't cheap.... did they require you to have all your maintenance done by them??


Not my Charger, but no, the owner does most service himself. Dealer has to check the car every year (?), but he just had them do it when he got the car inspected.

 

[Andrew1972]

Originally Posted by AuthorEditor
Let's say you borrow $30k at 1.9% and instead keep $30k in a pretty conservative mutual fund earning 5% compounded annually. You're ahead 3.1% the first year, and every year for the life of the loan. It's how banks make money. They essentially borrow from you at a low interest rate and invest the money where it earns a lot more.


You are leaving out risk component. Would you borrow $30k to invest? 3% on $30k is peanuts for risk involved.

 

[AuthorEditor]

Owning a new car is a bigger "risk" in that you know it is losing you money: depreciation, sales tax, insurance, maintenance, repairs, etc. Like I said, put it into a broad based mutual fund tracking something like the S&P 500 and the risk is low. Most cars are not investments. The goal is to lose the least amount possible.

 

[HowAboutThis]

Originally Posted by madRiver
Originally Posted by AuthorEditor
Let's say you borrow $30k at 1.9% and instead keep $30k in a pretty conservative mutual fund earning 5% compounded annually. You're ahead 3.1% the first year, and every year for the life of the loan. It's how banks make money. They essentially borrow from you at a low interest rate and invest the money where it earns a lot more.


You are leaving out risk component. Would you borrow $30k to invest? 3% on $30k is peanuts for risk involved.


If the interest rate owe vs earn is wide enough, it can work. However, the only time in my life where I could pay 2% for a credit card balance transfer and earn 5+% in a "safe" money market mutual fund was approximately the 2006-2007 era. And we all know what happened a while later. To get that mix you have to have the perfect Fed rate, inflation, bond rate thing going on. Not very likely, IMO. But it can happen. When it does I always wonder about the Ponzi Scheme nature of the economy and how much longer it can last before smart money says "yeah, this can't last much longer."

 

[AuthorEditor]

I still think that purchasing a new vehicle is generally a worse financial decision than buying used, but some of these 0% deals might make sense if you actually invest the money carefully. But, I bet in most cases it just encourages people to purchase more vehicle than they can afford, and the dealer gets his profit by keeping the price higher than if you pay cash.

 

[Mad_Hatter]

Originally Posted by Jarlaxle
Originally Posted by Mad_Hatter
Originally Posted by Jarlaxle

They offered that for quite a while. I had it on my Magnum, I know someone who has it on a 2006 Charger.

At over 300,000 miles, it's still covered. (Covered doing the rear main seal at 302K.)


Nice, replacing those main seals ain't cheap.... did they require you to have all your maintenance done by them??


Not my Charger, but no, the owner does most service himself. Dealer has to check the car every year (?), but he just had them do it when he got the car inspected.


Tx for the feedback. Not a bad deal if one is not required to have the maintenance or repair work done by the dealership. And an annual inspection doesn't sound too onerous. I've never really ever considered a Chrysler/Dodge/Jeep because back in my day the quality just wasn't there but I understand they've come a long way in that dept. The idea of a lifetime powertrain warranty, where I'm not tied to them for maintenance, just might make me a first time buyer...

 

[HowAboutThis]

Originally Posted by AuthorEditor
I still think that purchasing a new vehicle is generally a worse financial decision than buying used, but some of these 0% deals might make sense if you actually invest the money carefully. But, I bet in most cases it just encourages people to purchase more vehicle than they can afford, and the dealer gets his profit by keeping the price higher than if you pay cash.


I'm a total numbers person, knowing there are multiple ways to crunch numbers to get them to say what you want. It's what I do for a living. Manipulate people with numbers. When I bought my Corolla I found buying new was the best deal after "online" negotiations at multiple dealers. Not sure if that's still the case. My premise was cost to get $200k miles on the car. New was cheaper, barely. And they wouldn't budge on the used models at some point. There were tons of corporate cash off deals at the time, however.

After 2 years and 40k miles, KBB shows my private party value $1200 less than what I paid for it for a mid-range value.

 

[PimTac]

Originally Posted by madRiver
Originally Posted by AuthorEditor
Let's say you borrow $30k at 1.9% and instead keep $30k in a pretty conservative mutual fund earning 5% compounded annually. You're ahead 3.1% the first year, and every year for the life of the loan. It's how banks make money. They essentially borrow from you at a low interest rate and invest the money where it earns a lot more.


You are leaving out risk component. Would you borrow $30k to invest? 3% on $30k is peanuts for risk involved.




Short term leveraging is highly risky and has eaten many experienced investors alive. For the average Joe, he has no chance. If it works then chalk it up to pure luck.

Five years is very short term for investing in the markets.

 

[HowAboutThis]

Originally Posted by PimTac
Originally Posted by madRiver
Originally Posted by AuthorEditor
Let's say you borrow $30k at 1.9% and instead keep $30k in a pretty conservative mutual fund earning 5% compounded annually. You're ahead 3.1% the first year, and every year for the life of the loan. It's how banks make money. They essentially borrow from you at a low interest rate and invest the money where it earns a lot more.


You are leaving out risk component. Would you borrow $30k to invest? 3% on $30k is peanuts for risk involved.




Short term leveraging is highly risky and has eaten many experienced investors alive. For the average Joe, he has no chance. If it works then chalk it up to pure luck.

Five years is very short term for investing in the markets.


This is true. I'd only attempt for possibly a money money market mutual fund (lowest risk in the market) or for sure a CD backed by the FDIC ("no risk"?!?) but due to the market you'll rarely find this situation in your favor. It works for the huge investors because the government guarantees the risk with the assumption of "too big to fail" bailouts.