Is there a point where it makes more sense to take the loan for a vehicle than to pay it off when you buy it. For reference, I've bought exactly 3 cars in my life and only had a loan for one.
Toyota seems to be offering 2.99% for 72 months on new tacomas. That seems almost too good in current market. Thus my question.

Depends on if you're making more money with that total amount of money in the market than what you will pay interest on that loan.

You're always better off not having a loan...on anything.

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Originally posted by Gustofer:
You're always better off not having a loan...on anything.

100% agree with that. Being debt free is a game changer. Peace of mind is priceless.

But, sometimes the better deal can be had with finance, then pay off early if no penalty.

I just saw on TV where Nissan has 0% for 60 months for qualified buyers!

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Originally posted by BigJoe:
I just saw on TV where Nissan has 0% for 60 months for qualified buyers!

Yeah, but it's a Nissan...

I could beat that 2.99%, investing in the market, all fucking day. I don’t do cliches of this vs. that. All I’d say at 2.9% or under, it’s not worth bothering or worrying about at that point. Do what you feel is best and save the debates for more serious things. That’s cheap money. I just built a full studio and used about $10k in $0% credit. 65% of that was 48 months, with 35% being 24 months. If they are offering free money or cheap money, I’m taking it every time. Frees my existing cash up to do something else, like remodel a room in the house. Invest. Save. Or buy something I have been putting off.

quote:

Originally posted by Gustofer:
You're always better off not having a loan...on anything.

Totally agree. People will argue with simple math but if being financially astute is more of a mentality problem than a simple math problem.


When you write a check for anything it’s much more painful mentally than it is looking at small bights extended for a long time so you tend to get something much closer to what you need instead of way more than you need.

Never had a car loan, never will. The differential in the interest/return I could make on the money being invested vs. the interest paid is insignificant enough in the grand scheme of my complete financial picture that I derive more personal value from not having a car loan. I am also not buying $80K cars like some people are these days, so YMMV. I am fortunate enough to have been able to pay cash for every car I've own, but I guess that says something about having decent financial sense in the first place.

For me, I did a 0% on my current vehicle with the money coming out of a high yield savings. Money I wouldnt have if I just paid the entire loan off instead earns me about 4-5%. Just a thought. I also get good credit as the payments are reported.

I'll say payoffs are nice if you like knowing you dont have bills but I paid off all my debt when I got out of the Army and sold off some investments that would likely be quite profitable today to do it. In return I killed my credit as I had no bills, I didnt have bad credit, I actually had no credit. It turns out in this wacky world that that is actually a problem.

It never makes sense to keep debt like a pet. I paid off a brand new 2017 Honda Pilot in 2 years.

For me, I always make out on car loans.

My return on investment has always been at least 5% over the car loan.

It can be a substantial percentage of the value of the car.

YMMV

A man without money worries about what the payment will be.

A man with money worries about what it will cost.

Any new car loses ~20 percent of its value the moment you clear the dealer's driveway with it, and only gets worse from there. It makes no sense to drag out the payments any longer than necessary. Also, some cars aren't even going 5-6 years without major work like engines or transmissions. Assuming no prepayment penalty, make the largest payment you can.

Never pay interest on anything that depreciates in value.

It’s all about the numbers. You’re talking about a 3% loan. The first question in my mind is: are you paying the best purchase price for the car? If the “real” price of the car is $100,000 but the special price to you is $130,000 with the 3% offer, then the whole deal doesn’t look very good, right?

And you can’t really ask, “how much if I pay for it outright?” Because car dealers usually are willing to shave off some from the purchase price expecting to more than make up from the financing.

Also, I don’t know if car financing has changed over the years but car loans from car dealers used to have the interest front loaded so you’re not paying the straight APR meaning if you decide to pay off the loan in two years, you owe a lot more on the principal than a car loan from your credit union.

If the interest portion is calculated normally and not front loaded and you can invest the money that will earn you more than 3.06% then mathematically, taking the loan is better. 3.06% is the break even point assuming your marginal tax rate is 20%. 20% of 3% is .06%. You need the additional.06% to pay for the taxes you’ll owe if you invest in something that earns you 3%.

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Is there a point where it makes more sense to take the loan for a vehicle than to pay it off when you buy it. <SNIP>

Toyota seems to be offering 2.99% for 72 months on new tacomas.

If you can afford to pay in full on the spot, I see no sense giving the dealer more money.

The guy above stated it correctly. If pulling money from a source that outperforms the interest rate then it makes sense. Having a reasonable sized loan where you are paying minimal interest while keeping your cash working for you makes sense.

On this thread you literally have guys saying they would pay cash instead of a 0% loan. That’s dumb. I can’t tell anyone their own sweet spot but I can tell you on my last car I was going to write a check until the finance guy offered me a 1.9% rate for 3 years. I can beat that performance in my sleep and I took it.

Loans aren’t the devil that they are made out to be. Smart people use other peoples money to make money all the time. You just have to make sure you are on the right side of that equation.

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On this thread you literally have guys saying they would pay cash instead of a 0% loan. That’s dumb. I can’t tell anyone their own sweet spot but I can tell you on my last car I was going to write a check until the finance guy offered me a 1.9% rate for 3 years. I can beat that performance in my sleep and I took it.

It may be dumb for some people but not for others. I am at a time in my life of 80 years that I may not be around tomorrow. I need to make my death as simple as possible for my wife as our income will be cut by two thirds for her. No mortgage, no auto loans & no debt. I even schedule the monthy utilities a month ahead with estimated amounts. For others not so much as bank savings accounts are paying about 4% or more, with an after tax rate of 2.5% to 3%. Also when buying an auto from a dealer you should get a better price when financing through the dealer. Dealers get kickbacks from banks & finance companies, or subsidized by the manufacturer which increases the dealers profit on a sale.