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I have always been very conservative on this subject. I am about to purchase a car (a non daily driver fun car) for about $30k and I was 100% on board for just paying cash for it. I have plenty of other savings, retirement accounts, investment accounts, so this 30k would not be doing anything other than collect dust in my savings account.
I'm 23 and also have over 500k left on my mortgage. I have always thought mortgage was the only kind of debt I would take part in, but people have been telling me that I should consider financing and trying to beat the interest rate.
pay cash and pay yourself back if you must have payments. What's the point of filling someone else's wallet with your money? If you have this kind of cash laying around...why don't you pound the mortgage?
Sorry, no way does it make sense for anyone that has $500k of mortgage debt to be thinking about spending $30k on a "fun car" and asking if it using cash or even more debt is sorta goes so far past what the real issue is...
I don't care if this $30k represent less than 0.5% of the OP's income (which would mean the OP has income of $6M ...) or if this represents something more than 10% of income ( <$300k) there is just NO sense in blowing that much cash on a depreciating asset. And yes every $30k fun car is a depreciating asset -- doesn't matter if is some "classic", at that price point it ain't something that has appreciation potential.
And just to be clear, I say the same thing regardless of total net worth / age -- well, let me clarify, I am pretty darned sure Warren Buffet doesn't currently have a mortgage on his home and if Zuckerberg was looking at a "fun car" I think his assets are sufficient to get a Bugatti ...
If you can get financing at a lower rate than you're earning wherever the $30K is parked I would take the financing and leave the money where it is. As long as you have the money available to pay it off immediately if you need to for some reason there's no reason not to borrow if it makes sense from a financial standpoint.
But if the interest rate on the loan is going to be higher than what you're earning on your savings just pay cash and be done with it.
That being said, I agree with chet everett that it's rather ridiculous to hold onto a $500k mortgage if you can help it. Not saying that you should totally deny yourself if you're making good money, but you can buy a pretty damn fun car for way less than $30K which would leave quite a bit to chisel down that mortgage.
I am about to purchase a non daily driver fun car for about $30k paying cash for it.
A) savings, retirement accounts, investment accounts
B) 500k left on my mortgage.
Subtract B from A then divide the result by $30,000.
If the result is greater than 10... then no. Find some other toy.
If the result is greater than 20... then tell us all who your investment adviser is.
I typically always pay cash for my cars. In fact it's been so long ago that I've had a car loan that it fell off my credit report (I think they stay on around 10 years). So my FICO actually fell a bit. I paid off my mortgage a while back as well so I had nothing but credit cards (also with no balance) on my credit report.
When I was buying my wife's car I decided to get a 0.9% 3 year loan. My FICO score went up and obviously it's much easier to beat that return.
Whether you should get the car is a totally separate issue and I don't think people should be hassling you about.
There are a lot of credit unions that are VERY easy to qualify for that have no car loans for as low as 1.49% APR (Alliant is one of them below). As well, many dealers even have 0% financing so if this is the case then I'd do that.
30K is not THAT much for a car.
If you can finance it for next to nothing, get it.
Some people are so anti-debt, they'd live off rice-and beans all their lives and drive a beater, then also not eat out, out travel if they couldn't pay cash for it.
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