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So you're basically saying that you'll always have a car payment. How is this any different from a person who finances a vehicle, then trades it in for a newer vehicle once its paid off and continues with payments on the new vehicle, and so on? A payment is a payment whether its to ones self or to a 3rd party. If you're able to get interest free financing I dont see the difference to be honest. Yes one can say that "well I make the payment to myself therefore I'm not contractually obligated to pay myself next month if I dont want to". That only means that your financial plan for a future car isnt on track accordingly. Hey to each thier own. Whatever makes you sleep good at night I guess.
And there in lies the issue. Money isn't lent for free, there is a cost involved even if the interest rate is 0%.
We bought a new fridge about 7 years ago, I noticed the store was advertising interest free payments for two years. When I asked the salesman about a cash price instead of financing, he was able to knock about 250 off the advertised sales price and give free delivery/install, but I had to pay with cash/credit card only.
And there in lies the issue. Money isn't lent for free, there is a cost involved even if the interest rate is 0%.
We bought a new fridge about 7 years ago, I noticed the store was advertising interest free payments for two years. When I asked the salesman about a cash price instead of financing, he was able to knock about 250 off the advertised sales price and give free delivery/install, but I had to pay with cash/credit card only.
You do realize that you can negotiate the car's price before you decide on/tell anyone how you're going to pay for it, don't you? It's not like if you finance at 0-1 percent, you have to pay full boat. I've financed cars using my credit union at 0 percent and negotiated the price of the car same as if I was paying for cash, so yes, the financing is, in fact, free.
I might have stated this earlier, but the ONLY way I would buy a brand new car with my own cash is if my credit wasnt up to par and I want to avoid paying high interest fees. If its a 2k beater then I wouldnt mind. Why would I tie up a large sum of my liquid cash into a big ticket purchase when I can hold on to it and use it for other things or investments. Most wealthy people have a motto..."other peoples money" They dont tie up thier own cash for stuff someone else can pay for whether it be in the form of a loan, etc. They let other peoples money work for them while holding on to thier own.
Let me tell you why we do it. Wealth creation. It is our goal to build a net worth of $5 million or more within the next 20 years.
You don't accumulate $5 million by stashing away $400/mo in car payments. In fact, you don't accumulate that much by savings or investments. You have to MAKE most of it. Unless you are making half a million a year (and living it) you are not gonna get to 5mil.
You don't accumulate $5 million by stashing away $400/mo in car payments. In fact, you don't accumulate that much by savings or investments. You have to MAKE most of it. Unless you are making half a million a year (and living it) you are not gonna get to 5mil.
LOL, this was my initial thought when I read that. How does a small car payment derail you from making $5mil over 20yrs. To be able to save that there has to be some heavy investing going on or be in a very lucrative business making a sizeable income.
Where else do you pay interest on a depreciating asset? It makes no financial sense but we keep on doing it. Just part of our credit card/instant gratification society I guess.
A 5 year old used econobox with some basics A/C, stereo etc. is a necessity for reliable transportation. Anything above that is a luxury that should be bought only if you have all your other financial goals being met and also have the cash to pay all of it.
Financing depreciating assets like cars is a fools choice, yet many don't care...they want to live their life of luxury on borrowed money.
Where else do you pay interest on a depreciating asset? It makes no financial sense but we keep on doing it. Just part of our credit card/instant gratification society I guess.
A car is hardly an investment. To the majority of people a car is a necessity in order to go about thier daily functions. If my monthly net is $5k but I need to spend $300/month on a car so that I can get to/from work in order to take home that $5k, then to me its well worth it despite the fact that it depreciates by the day.
Where else do you pay interest on a depreciating asset? It makes no financial sense but we keep on doing it. Just part of our credit card/instant gratification society I guess.
It's also our government that encourages financial delinquency by ultra low interest rates and ready availability of credit.
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