No way to earn that easily. The stock market? Maybe long term, but could easily drop over the term of a loan.
Just like our Vanguard fund has been doing lately.
@Bing If you could tell us where we can get 7 to 15 % I am sure the place would give you a commission for new customers.
Bing, the reason I mention depreciation is because even if you finance a car at 0%, the car is losing value at some percentage. Your investments are hopefully making money at some other percentage. To compare the two, it would seem like you’d need to take into account the depreciation (loss on the car investment) plus the interest rate on the loan vs interest earned on the investment. Which that interest rate is hypothetical anyway unless you can get that money today. But I’m no accountant.
Depreciation happens regardless, so it’s not part of the ‘cash or loan’ decision.
It’s curious how when someone saves money and accumulates enough cash to buy a car outright it becomes more difficult to let go of the money compared to signing a note to buy a car on terms that costs considerably more. But that same reluctance goes for furniture, televisions, boats, etc.
One reason could be the loss of liquid assets. Having cash in the bank helps to sleep at night, not worrying as much about unplanned events (i.e. nest egg). Once you spend it, it’s gone. The alternative is to pay by the month (albeit more) but if something happens, they can come get the car and wash their hands of it- with some complications of course. It doesn’t make sense to the logical/financial side of the brain but does appeal to the emotional side…
That is evident.
The car is going to lose value at the same rate whether you buy it with cash or a loan. For purposes of calculating whether it makes more financial sense to pay cash or take out a loan, the depreciation of the car is not relevant because it is a constant.
The accountants and political pollsters share a similar level of trust these days. I was lucky to have found some peace and contentment wearing a blue collar with greasy hands.
Oh boy. Just from my latest 401K statement. Of course the options are closed to outsiders, but just have to look a little or talk to someone like Ed Jones.
T. Rowe Price Small Cap Stock Fund: Since inception: 10.63%, 2013, 37%, 2017, 15%
Vanguard Mid Cap Index Fund: Since Inception: 12.57%, 2013, 35%, 2017, 19%
Vanguard Institutional Index Fund: Since Inception: 7.67%, 2013, 32%, 2017, 21%
Or you can go chicken little with Money Market at .18% to 1.05%
I believe in American business so in 2007 the only thing I did was dump international funds. I have not been sorry and concluded the Europeans are nuts and are on the wrong long term track. In three years, the 2007 loss was re-gained again by doing nothing, just like after the 1929 crash. Those that jumped out of windows lost but those that hung on won.
So yeah, I have cash to pay the house and car, but why do it when I can get 2-3% money?
But Dave Ramsey says…
Maybe so. But all my stuff’s paid for at age 44. If I lose my 401k due to an economic collapse, I can still sleep in my house and drive my truck to work. If I still have a job, that is.
I wonder how things would have worked out if stabilizing the 2007 crash had included paying down over priced mortgages rather than paying off poorly managed banks?
Coulda, woulda, shoulda, who knows? Prevention though is always better than trying to manage a crisis once it happens. Pick a subject. Build a strong power distribution system instead of rotten poles for protection in a hurricane. Prevent epidemics with good policy and vaccines or manage it when it spreads? Loan money to those with decent credit and an ability to pay? Of course all that goes out the window if you are pressured to make home loans to unqualified people and you can turn around and sell the paper the next day to the feds and get your money back. It was a circus run by fools. Some of those fools are still around.
And look what happened to Brooksly Born when she recognized the foolishness and tried to warn that the SMARTEST PEOPLE IN THE ROOM were actually fools.
Of course it was those fools who walked away with the prize while their marks got stuck when the bell rang.
You can spend the rest of your life waving a finger at “those guys”, or you can spend the rest of your life paying close attention to taking care of yourself and your resources. The answer to the original question is one of those answers that comes out as, “It depends.” And the variations that exist among us show that clearly. If you are working at a steady job, in the middle of your life, raising kids and trying to plan for your future, that’s one idea. If you are 70 and living on Social Security, maybe a pension or a 401(K), and whatever money you have stashed away over the years, the answer may be very different.
The answer is always up to you, and so you have to do your homework. And read what you sign. The pressure to just sign and go is powerful, and people treat you like a jerk for wanting to read the fine print, so so what? Be that jerk.
While we are each responsible for our own success and failure, without some enforcement of logical rules in banking, finance and commerce the unscrupulous will find ways to legally rob those who are foolish enough to trust them. The economists seem to agree that 60% of Americans live pay check to pay check and that situation cannot continue if we hope to see a meaningful and continued prosperity for the vast majority of US, most of whom don’t wish to be wheeler-dealer investors but do wish to find the opportunity to work and earn a decent pay check to support their families comfortably. It is more important that the government regulate business to protect those less sophisticated from being ripped off than to protect financial institutions from the poor… IMNSHO.
Congraduations on saving the money. Per PBS, 40% of American families could not handle a $400 emergency without borrowing money. 50% could not raise $2000 in 90 days. No suprise there.
I could buy any car I want today for cash. But I have not. I lease, but that is my decision.and many dislike leasing. A big stumbling block for buying, to me, is the sales tax. Here is Southwest FL, it is currently 6%. In a lot of places, it is much higher That’s $3000 up in smoke on a $50,000 transaction. You get credit for a trade in, but it’s probably only valued at 50% in just three years.
In Florida, the sales tax only applies to the monthly lease payment, and any down payment you choose to make. Leasing is another layer of complexity, and most salespeople, and most leasees don’t understand it.
I once got a $2700 “discount” because a salesmanager screwed up the residual. I pointed it out before signing. He insisted he was right. They had to lower the sales price by $2700. I offered to unwind the deal for a “buyer’s fee” of $500. They declined. Hurray for our side.
It has suddenly occurred to me that the country’s political party bases have become a conflict between the deplorables and the undeserving. That’s like choosing between a Lada and a Tata then bragging about your choice.