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Where are you people putting your money on deposit that makes useful interest? I'm finding CDs running from 0.4% (6 mo.) to 1.0% (5 yr) and passbook savings at 0.5%.
Yes, you can make more money in the market; of course you can lose it too. US Treasury obligations are running well below 1% for reasonable terms.
If you take a loan with interest, you WILL pay that interest - unlike investing in the stock market where there are no guarantees.
This whole discussion, of course, only applies to people who have enough cash on hand to buy a car outright; then it's a decision. If not, then it's not a decision. There are people with $500 on hand who need to buy a car. For them, a loan is the only option.
my 10 year average return of all my money (including cash) is 10.41%. the lifetime is lower but for some reason fidelity isnt showing it to me now. its somewhere around 8.4% i believe. anyway, so if i can finance below 3% it seems like the wise thing to do for me.
its not a guaranteed return so i wouldnt finance if its 8.3%, i really dont know the highest i would do. but interest rates are low enough now that financing generally feels right to me.
Curious to hear about your experiences financing – did you take a car loan? How was that process?
You'll have the "pay cash" crowd and the "finance" crowd. You're asking the about that latter. Yes, just about everyone takes a car loan at some point or another, I've had a dozen or so between quite a few cars in my time. Including motorcycle loans, and I've owned about as many bikes as cars. I've paid cash for a few bikes and cars, too. The question is financial, going to cost of money and cash flow. Might want to ask another part of C-D about that, there are big brains over there who can explain in-brief or in-detail.
The "process" is simple: 1) decide how much you wish to finance before making any deals. Have yours lined up beforehand with your favorite bank or CU. Dealer or private sale, doesn't matter. 2) dealers can sometimes beat external rates, I've gone with their lenders a few times. 3) Your credit will be checked, regardless. 4) depending on your risk, a rate will be provided. Shorter term, higher payment, less cash flow month-to-month but less interest paid overall.
If you have credit problems, for any reason, you'll pay more in interest rates: higher risk.
Very few people make money on vehicles, the overwhelming majority depreciate like rocks then the curve levels off. Loans end up upside down if not taken carefully. They are financial dogs, necessity vs. investment. I sometimes buy used, sometimes new: that's a personal risk analysis decision to make first.
Very few people make money on vehicles, the overwhelming majority depreciate like rocks then the curve levels off. Loans end up upside down if not taken carefully. They are financial dogs, necessity vs. investment. I sometimes buy used, sometimes new: that's a personal risk analysis decision to make first.
its so silly when people talk about how cars depreciate as if that is some kind of novel concept they are mentioning. they think it demonstrates financial knowledge when it does the opposite. just about everything we buy depreciates tremendously after we purchase it. when you go to a restaurant, that food depreciates by almost 100% once it gets put in front of you, then 100% after you consume it. a car is a tool, not an investment. its not supposed to appreciate.
We just did that on a new Outback, 0% interest for 63 months. The cost is the same as paying cash, but you can leave the money in the credit union making interest instead of paying interest.
Someone always pays interest. There is really no such thing as a 0% loan; why would there be?
So you pays the interest? ....... You do, of course. But how?
You pay $30,000 for a car. The whole 30,000 is financed at 0%, but the dealer only gets $28,000 for the car. The other $2,000 is the interest that the finance company is paid through your 0% loan.
So the finance company paid out $28,000 and gets back $30,000. You leave feeling good because there is no interest. Slick, huh?
And that 63 months. Why not 60? What's with the extra 3 months? ............. They financed your down payment, too.
It may not make a hill of beans difference! You may be perfectly happy with your arrangement, and if you work it out based on what you could have got the car for - $28,000 - and financed it all in regular manner, it all comes out the same, or nearly so.
We are all consumers. When someone gets my money I would like to know why and how much, that's all...
its so silly when people talk about how cars depreciate as if that is some kind of novel concept they are mentioning. they think it demonstrates financial knowledge when it does the opposite. just about everything we buy depreciates tremendously after we purchase it. when you go to a restaurant, that food depreciates by almost 100% once it gets put in front of you, then 100% after you consume it. a car is a tool, not an investment. its not supposed to appreciate.
Eh, the question seemed novel, so I gave a simple if over-communicated answer. Poster was a first-timer, dunno where s/he is coming from in terms of head space and knowledge about (anything).
Food is a consumable, I'm starting to believe the automotive "experience" is roughly similar. There are a few optimists who believe they will make money on a car, just wanted to head that off at the pass.
Eh, the question seemed novel, so I gave a simple if over-communicated answer. Poster was a first-timer, dunno where s/he is coming from in terms of head space and knowledge about (anything).
Food is a consumable, I'm starting to believe the automotive "experience" is roughly similar. There are a few optimists who believe they will make money on a car, just wanted to head that off at the pass.
i may have seemed like i was disagreeing with you but i wasnt. just further emphasizing your statement that cars depreciate like rocks. they depreciate like any other tool. a certain amount when you buy them as they become used and then a certain amount over time as they get more wear on them. i always find the depreciation notion funny when it gets included in a finance discussion since it doesnt really belong here.
Just because you have the ability to pay cash doesn't make it the best move. I finance as long as the interest rate is low enough. I don't put money down.
Quote:
Originally Posted by CaptainNJ
when someone says something like the above bolded post, you immediately know that they have no idea what they are talking about. paying cash or financing is in no way linked to the cars depreciation, it will depreciate the same either way. its a financial decision that has to do with your money, not the product you are buying.
Regarding the bolded, I usually avoid the "I finance cheap and invest" or "I pay cash all up front" arguments as I find them pointless, but I saw something worth mentioning.
They depreciate the same, whether you pay 100% cash, finance 100% or some balance between the two of them.
The "I finance 100%" side does miss the very real possibility of having your back against the wall and being upside down in a car, and needing to get out of it. Oftentimes, when it rains it pours, and when you're looking at getting out of the car you're doing so because life has served you a turdburger in other venues as well; the big 3 are job loss, major medical event, Divorce/custody battle but there are others to be sure.
If you don't finance more than 80% of the car's value it's way easier to stay ahead of it; you aren't dipping into savings/investments at a time when they're more important than ever or having it repo'd since you've kept the car as long as you can since you need a car and couldn't get out of it.
Credit union, great rate, financed 100% of my car, let the cash sit collecting far more interest than I am paying on the loan.
All but one of my cars were bought used and with cash. The one time I got a new car loan it was also through my credit union and it was done for the same reason above. Don't recall any problems doing so but this was 20 years ago. My credit hasn't been a concern. I knew I was going to make a long distance work-related move in a couple of years which would involve selling my house. The loan would be short term. The job transfer came up, I sold the house for a profit, and paid off the car loan. Yes, I know I've been fortunate to be able to plan such a purchase ahead. I shopped and decided what car I wanted, got the financing set up through the credit union, then approached the dealer.
Last edited by Parnassia; 10-28-2020 at 12:55 PM..
....................The "I finance 100%" side does miss the very real possibility of having your back against the wall and being upside down in a car, and needing to get out of it.............................
That's the biggee, right there. If you finance 100% of a new car you are going to be upside down for many, many months.
It may be no big deal. But if some sleepy dump truck driver takes out your 3 month old Hupmobile while it is parked at the curb, you could be out a lot of cash. You just spent 30K, you owe 29,750 and the insurance company is telling they will pay 25,000 because it depreciated and you have a pretty high deductible.
That used CR-V you almost bought suddenly looks pretty good.....
The "I finance 100%" side does miss the very real possibility of having your back against the wall and being upside down in a car, and needing to get out of it. Oftentimes, when it rains it pours, and when you're looking at getting out of the car you're doing so because life has served you a turdburger in other venues as well; the big 3 are job loss, major medical event, Divorce/custody battle but there are others to be sure.
If you don't finance more than 80% of the car's value it's way easier to stay ahead of it; you aren't dipping into savings/investments at a time when they're more important than ever or having it repo'd since you've kept the car as long as you can since you need a car and couldn't get out of it.
so you are basically dumping the additional cash into the car now for fear of being underwater later. doesnt really make much sense.
being "underwater" is also not an actual financial issue. its more of a mental issue.
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