Would you ever pay off a sub 2% auto loan?

[volk2k]

Originally Posted by ncole1

In the real world you don't get a 6% (annualized) return every month, month after month. It fluctuates. So your result will fluctuate depending on the market over the course of the loan. Also keep in mind that if you pay cash for the car or pay the loan off and then reinvest your monthly payment into the market, you are DCA instead of lump sum investing.

We are all dealing in hypotheticals here so we have to make some assumptions.


I used a relatively low 6% CAGR in my example. If you can show me a better calculator to forecast, I'm all for it.


I can still dollar cost average into the market in my scenario as well... with more money per month than with a completely paid off car that has diminished my capital.


You still have not proven that paying cash for a car is better than taking on a 2% loan.

[volk2k]

Originally Posted by Mideto

So typical.

My point stands, you aint out smarting anyone by keeping the loan, the banks still win

That's fine, I'll laugh all the way to the bank with my 2% car loan


Some people just can't be helped... or get approved for another credit card... good luck in life!

[CaptainNJ]

Originally Posted by Mideto

So typical.

My point stands, you aint out smarting anyone by keeping the loan, the banks still win

both parties are winners. its not us vs the bank when we take a loan.

[ncole1]

Originally Posted by M_M

Cheap debt is good for making money. I would invest it and make a better return. It's not guaranteed of course but at that rate it's very likely. Paying it off now is making a conservative investment in making (or really, preventing yourself from paying) the low interest on the loan - so a 1.9% investment. I'm not excited about a 1.9% investment.

Many people have a hard time mentally carrying even cheap debt and consequently make decisions that are poor financially but justify it because they feel the debt-free feeling is worth more than the money they lost out on. I understand that but would not do it myself.

It may not actually be a poor decision. In microeconomic theory there is the concept of a utility curve which is subjective, varying from one person to another. Depending on the subjective value of various outcomes, it may be rational not to take the risk.

[ncole1]

Originally Posted by volk2k

We are all dealing in hypotheticals here so we have to make some assumptions.


I used a relatively low 6% CAGR in my example. If you can show me a better calculator to forecast, I'm all for it.


I can still dollar cost average into the market in my scenario as well... with more money per month than with a completely paid off car that has diminished my capital.


You still have not proven that paying cash for a car is better than taking on a 2% loan.

I'm not claiming paying cash always wins - that would be false. I am simply pointing out that it is not so simple as loan rate vs. investment CAGR.