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Just pay cash for the car. I always hear a form of the argument that 'I took out the loan then invested the money and made a huge profit on the spread'. BS - the average person making the argument went on vacation or spent the money some other way. That is why Americans, as a whole, have no money saved and live pay check to pay check. My recommendation is always buy the car you can afford to pay cash for. Debt is a trap.
I will dismount my soapbox now.
Taking time out of the time value of money makes perfect sense if you plan to live forever.
I’d much rather finance a car and pay cash for a vacation vs the other way around.
Location: San Ramon, Seattle, Anchorage, Reykjavik
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Quote:
Originally Posted by Lowexpectations
I’m amazed how many times I’ve heard people quote how much interest you pay over a 30 year mortgage like it’s a ripoff. You are borrowing a rather large sum for three decades, THREE DECADES. How much do you think is a fair amount to pay to use someone else’s money for 30 years?
3 decades is the issue. If it takes 30 years of YOUR LIFE you bought too much house, paid it off way too slowly, or should have rented.
I go through cars quickly because of a long commute. Typically I buy 7-9 year old vehicles, less than 40k on the clock, with a max budget of $15k. I'll put down 1/2 and my previous vehicle as a trade in. Never paid more than 10% rate on a 3 year which I generally pay off very early 1-2 years without penalty. Any older, most banks won't finance.
that...
Or I simply pay in cash if I have it.
Last car, I paid 1/2 in cash and I financed myself via a home equity line (3.5% rate). It will be 1-2 year loan unless some emergency requires that I delay it.
As for home finance.... my payment (principle, interest, insurance, and tax) is cheaper than rent.. way cheaper. Rents have climbed but I've essentially "locked" in the mortgage payment portion for 30 years. Property tax keep rising but we live in a modest home... it rose $2500 over the course of 19 years. I'm not going to fall into the trap and keep buying bigger and bigger as my salary increases. My current rate is 3% and I'll be done before the 30 year mark.
There's nothing wrong with loans if done properly and not abused. I don't carry much revolving CC debt... the type of debt that is very difficult to climb out of because of the rates. I still contribute to retirement, kids college, and savings. Once the kids are no longer in day care (which by itself is about as much as my house payment), we will be ramping up savings/investments.
Do most average Americans don't have any savings, with only less than $2,500 in checking?
Depends on how it is measured, but seen anywhere form that figure to a negative rate.
Quote:
Originally Posted by Stonepa
Then all you can afford is a $1500 car, leaving a $1000 in savings. Debt is why America is full of broke entitled people that look rich.
Fact is numerous people actually need a car to get to work and provide income, and they will not find one worth a damn for $1500. People can generally afford a $200 monthly payment, but not one time $1000 repairs. This is why many people get the cheap, used cars that have the power train warranty still, bumper to bumper, or they purchase a warranty and roll it into the payment.
Those looking at purchasing 30, 40+ thousand dollar cars are the ones benefiting off the low interest rate by having that money elsewhere making more than the interest is charging them.
3 decades is the issue. If it takes 30 years of YOUR LIFE you bought too much house, paid it off way too slowly, or should have rented.
Find them a lower cost house, or find them a much higher paying job then. A lot of markets people have no choice but a 30 year mortgage due to prices being so high. Renting in these markets often is higher than a mortgage payment, and the person builds zero equity in the home.
3 decades is the issue. If it takes 30 years of YOUR LIFE you bought too much house, paid it off way too slowly, or should have rented.
No three decades isn’t the issue. People’s poor math skills and understanding are the issue. Well that and blanket statements like the one you’ve made that ignore present value vs future value of money, effective interest rates after factoring taxable benefits, opportunity costs and a host of factors you’ve conveniently ignored while tossing out your blanket statement
I have a 2006 Hyundai Tucson, bought it used with 70K for around $6700.
Financed it thru my credit union who ive been with for over 10 yrs.
Payments are $210 a month for 5 years, and when I paid it off, I will have paid $12,600, so the credit union is basically doubling their money!?
I noticed the same thing years ago when I was married and bought a house, the house was listed for $120K, our monthly payment for 30 yrs was around $850. If we made all the payments, we would have paid $306,000! That means our real interest rate was over 100%...right?
The best money plan is really simple. BORROW LONG, PAY SHORT.
By this I mean......take a long term loan then pay it off ASAP.
Reason for this is to ensure that you can make the payments if times get to tight. Pay short means that you will avoid all the , or almost all, of the interest on the loan thus having more money to spend overall.
Warning: this plan is fast track to money hell IF YOU FAIL TO FOLLOW THE ORIGINAL PLAN!!
I have a 2006 Hyundai Tucson, bought it used with 70K for around $6700.
Financed it thru my credit union who ive been with for over 10 yrs.
Payments are $210 a month for 5 years, and when I paid it off, I will have paid $12,600, so the credit union is basically doubling their money!?
I noticed the same thing years ago when I was married and bought a house, the house was listed for $120K, our monthly payment for 30 yrs was around $850. If we made all the payments, we would have paid $306,000! That means our real interest rate was over 100%...right?
Let me guess...you told the salesman you only wanted to pay $200 a month and he said something like "We can make that work." There you go! You bought a payment, not a car.
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